Minutes of the Oct-16 Tata Sons Board Meeting at Bombay House.
There was not much time to think. Mistry messaged his wife, Rohiqa, that he may soon be sacked. There was probably no time to consult a lawyer. Surely, there were some board members who would side with Mistry?
Mistry walked a few paces from his office to the boardroom to get the meeting started. This was the last stage in the game of chess.
Present in the room were:
Ratan Tata – chairman emeritus (an honorary member with none of the usual rights associated with board members).
Ishaat Hussain – finance director since 1998; career-long Tata professional.
Vijay Singh – nominee of the Trusts since June 2013; former IAS officer with over forty-seven years of experience.
Nitin Nohria – nominee of the Trusts since September 2013; dean of Harvard Business School and regular adviser to Piramal Enterprises companies.
Ronendra (Ronen) Sen – independent director (a non- executive director on a company’s board usually tasked to represent the interests of minority shareholders and uphold corporate governance) since April 2015; diplomat, India’s Ambassador to the US between 2004 and 2009.
Farida Khambata – independent director since April 2015; strategist at Cartica (an investment firm that acquires companies and controls their management in emerging markets), and former member of the International Finance Corp.
Venu Srinivasan – independent director since 26 August 2016; chairman of TVS Motors.
Ajay Piramal – independent director since 26 August 2016; chairman, Piramal Enterprises,
Amit Chandra – Trust-nominated director since 27 August 2016; MD, Bain Capital, part of the Asia leadership team and India head, also brother-in-law of Nitin Nohria.
Mistry walked past some members to settle into the chairman’s seat, which was marginally bigger than the others.
The Tata Sons board had nine members: three trust-nominated members, four independent members and two executive members: Mistry and Hussain.
What transpired after that can be best described as “Gone in 60 minutes” because the meeting lasted just that long.
Mistry sat in the chairman’s seat and initiated the meeting at 2 p.m. He was officially informed that Ratan Tata would be joining them.
Nohria: Tata Trusts has asked us to bring before the board a motion [not mentioned in the agenda].
Amit Chandra: We, the trust-nominated directors, held a meeting earlier this morning and have agreed to request Mr Mistry to step down as chairman. Mr Mistry, would you like to reconsider and resign before we initiate formal proceedings to change the board?
Mistry: I’d request Mr Tata to please say a few words.
Mr. Tata: At this stage, I am just an observer.
Chandra: Mr Mistry, do you have any views on the motion? [to remove you as board chairman]
Mistry: The motion, sir, is illegal. The Board, including all its members, must be informed at least 15 days in advance before such a motion can be put before it.
This set the tone for Mistry’s refrain for the rest of the meeting. On everything else that ensued as well, Mistry noted his objection to no avail.
Chandra: We actually have obtained a legal opinion which suggests that in the current situation the notice is not necessary.
Mistry: Gentlemen, would you be so kind as to share this legal opinion. I am not aware of it and I do not agree with it.
Chandra: Mr Mistry is an interested party, I would like to bring this before other board members. For the purpose of this meeting, I propose Mr Singh act as chairman hereon. Let’s put this to vote.
Ishaat Hussain: I would like to abstain from voting on this.
Farida Khambata: I would also like to abstain, please.
It was later said that Hussain and Khambata were caught unawares and were reluctant to make a hasty choice either way. While Khambata was brought to the Tata Group by Cyrus Mistry, Hussain had spent his whole career with the group.
The remaining six directors supported the motion and Mistry was now just a “man” without the “chair”. Khambata abstained from all resolutions proposed and passed during the rest of the meeting. Hussain voted in favour of all nine resolutions the board passed during the rest of the meeting.
The minutes of the board meeting show that first Vijay Singh became chairman for the rest of the meeting. He then proposed other resolutions that were not mentioned on the agenda.The first was to strip Mistry of all executive powers and annul all power he had been granted on behalf of Tata Sons. Then, the retirement age for directors that was set at seventy-five years was removed.
This was necessary because without that, Ratan Tata could not be nominated to the board.
Ratan Tata was nominated to the board as additional director and then made interim chairman. A selection committee was formed to appoint a new chairman.
Finally, sixty-year-old Farokh N Subedar, company secretary and chief operating officer, was given management control as the new chief executive of Tata Sons till a new leader could be identified.
Mr. Tata: We must recognise the work Cyrus has done over the last four years. It is important for the Group to move forward as seamlessly as possible. Cyrus, would you like to continue as a director on the board?
Mistry: Yes.
Chandra: Should we adjourn the meeting to consider this?
Mistry: Are we planning to make a public statement on what has happened here?
Hussain: Does Mr Mistry continue as the chairman of the Group companies? If not, this is a material change and the listed companies must report it to the stock exchanges.
[While Tata Sons is unlisted, its companies like Tata Steel, Tata Motors, Tata Consultancy Services and others are listed on public stock exchanges. The Tata Sons chairman typically is also nominated as the chairman of the top few of these companies as a measure of control. Cyrus Mistry was on the boards of seven such companies.]
Mistry: I will think this over and let you know.
Mr. Tata: Keeping directorship on the board is really up to you.
Khambata: Can we already announce this? There seems to be a question on the legality of these resolutions.
Chandra: I am not carrying the opinions, but they are from eminent lawyers and ex-Supreme Court judges.
Mistry: Could I please get copies of the written opinions? How can the rest of the board act without ever seeing these opinions? I would like to see these opinions today itself, please.
Chandra: Sure, we will check with the lawyers.
Mr. Tata: These are material developments to our company. What has happened here must be reported today itself. We should call a press conference.
All other items that Mistry had planned to discuss just over an hour ago were deferred to the next board meeting. His five-year plan was shelved without any further debate. Mistry was pushing for “tough love” of some projects that the board members nominated by the Trusts – and Ratan Tata – still believed in.
Mistry walked back to his cabin. He checked with Subedar whether he should return for a handover the next day. Negative.
Bombay House buzzed once again, readying for an explosive press announcement.
Three members of Mistry’s group executive council – a five-member panel that deliberated all strategic moves of the Group companies – were sacked summarily that night in a very American fashion.
‘It was literally like there was no need to come, your personal effects will be couriered to you,’ quipped a former Tata employee. These were Nirmalya Kumar, Madhu Kannan and NS Rajan.
Insiders and senior executives at other Tata companies were rattled that everyone was on the watch list. Many of them searched through their emails. Were there any that could be perceived as backing the wrong horse, they wondered.
Wadia – Tata Battle
It wasn’t just Cyrus Mistry who was removed from the Tata Group company boards. The shareholders of Tata Steel, Tata Chemicals and Tata Motors voted Nusli Wadia out too. The notice to remove Wadia came on the day he had convened a meeting with some independent directors.
It all started when Wadia spoke in favour of Mistry at the Tata Chemicals board meeting. Wadia could have been Ratan Tata’s staunchest supporter, but as events unfolded, Wadia and Tata ended up on opposite sides.
After the board meeting, in which Mistry was retained as chairman, according to senior executives and board members of Tata Steel, meetings were held by Wadia to discuss how to support Cyrus Mistry further. Wadia had been on the boards of Tata Steel for over three decades and Tata Motors for about two decades. Though Mistry was sacked as chairman of Tata Steel, he retained the position at Tata Motors.
The Tata Group’s retaliation against Wadia was more acute perhaps because Ratan Tata felt betrayed by a friend and ally, or perhaps because Wadia had the power to sway other decision-makers. Either way, the move to sack Wadia himself from the boards was put in motion and it was decided that this matter, too, would be taken to the shareholders at the extraordinary general meetings.
Nusli Wadia loves a good fight.
He fought for his business when he was twenty-six. He has litigated for possession of this home. He has litigated and won when he was accused of being a Pakistani spy, on account of being the grandson of Muhammad Ali Jinnah. It took some boardroom and shareholder mobilization for him to buy biscuit maker Britannia.
When Ratan Tata became the chairman of Tata Sons, Wadia fought to establish Tata against the satraps of the group. He continues to fight to secure land left in FE Dinshaw’s estate as the trustee of Dinshaw’s trust. He was now fighting once more in Tata’s boardrooms. Perhaps not as much for Cyrus Mistry as for his lifelong habit of taking a stand. ‘He isn’t fighting for Mistry . . . there is no special love for Mistry,’ points out a lawyer. ‘He’s fighting for a principle.’
Wadia started his business career with a battle. He returned after completing his education in England, to join Bombay Dyeing, his father’s business, in the late 1960s. In 1970, his father told him, he was selling the firm to settle overseas.
His father, Neville Wadia, backed by Pallonji Mistry, wanted to sell Bombay Dyeing & Manufacturing Co. Ltd., to RP Goenka, and planned to retire overseas. Young Nusli, who intended to expand the Wadia empire, was determined not to allow this to happen. He swung into action, and relied on advice from his godfather, JRD Tata. He mopped up shares from his mother and sisters, and stirred up the employees of the group into action. The employees forked out capital to buy shares, and blocked the deal with Goenka in support of Wadia.
With that Wadia became the leader of Bombay Dyeing from the get-go – he didn’t work his way to the top like other Parsi business scions. With JRD’s help Wadia was able to assert his control over Bombay Dyeing and other Group companies.
When JRD Tata was due to retire in 1991, Wadia, then forty-seven years of age, was even considered a potential successor to him. But, it was rumoured, that some years earlier, when it came to inducting Wadia on the Tata Sons board, Pallonji Mistry refused to allow it. So instead JRD appointed Wadia to the Tata Steel board in 1979 and the Tata Chemicals board later.
When JRD chose Ratan Tata to succeed him, Wadia supported his mentor’s decision. Ratan Tata had worked on the shop floor and had risen over the previous decade assuming various roles at most major Tata companies including TCS.
Boardroom wizardry was not quite his forte back then. He was generally retiring, little known and considered weak in front of stalwarts such as Russi Mody, Darbari Seth and Ajit Kelkar. Word on the street was that these strong operational heads of Tata group companies would soon marginalise Ratan Tata.
Wadia played a big role in proving the world wrong about Ratan Tata.
A magazine even called Nusli Wadia the corporate samurai of Ratan Tata. In fact, when Darbari Seth exited Tata Chemicals, it was seen as a personal victory for Wadia who helped edge him out. After the boardroom coup to overthrow Russi Mody, Wadia was rewarded with the post of vice president on the TISCO (now Tata Steel) board. Of course, at the time Wadia denied any prior knowledge of the impending reward.
Tata and Wadia were often seen together, both professionally and socially. Friends of both the men say that Wadia may have expected a seat in the Tata Sons board at some point but this was never given to him. Ratan Tata instead nominated Wadia to the Tata Motors board in 1998.
Indeed Wadia was a close professional ally of Ratan Tata’s. In 1997, Indian Express published illegally tapped phone conversations of Wadia. In those conversations, Wadia was heard lobbying for Tata Tea in Assam. The conclusion drawn by many from the tapped conversations was that Wadia shepherded Ratan despite Wadia’s businesses being significantly smaller than the sprawling Tata Group. The tapped conversation led to some distance between Ratan Tata and Nusli Wadia.
A Times of India report observed it was the first time in years that the two industrialists were not seen together at any major social event. Several people close to them say, though, that the drift was only for show.
In 1999, when Atal Bihari Vajpayee became prime minister, Wadia started spending more time in New Delhi. He had forged relations with Vajpayee and LK Advani over the years. People close to both Tata and Wadia believe this was when the two really started to drift apart.