It’s been over two weeks since Cyrus Mistry was shown the door at Tata Sons, but the fate of his position as chairman of many of the group companies is as yet unclear. If newspaper reports are to be believed, he has no plans to go either “quickly or quietly”.
The decision to keep or remove him will now come down to what these firms’ shareholders think, experts said.
“As a shareholder, Tata Sons can propose a shareholder resolution calling for his removal as director. The company will then have to call an EGM (extraordinary general meeting) of all shareholders, and in that meeting, shareholders vote to remove Mistry as director,” explained Shriram Subramanian, founder and managing director at InGovern Research Services, an investor advisory firm.
Mistry is chairman of Tata firms such as Tata Motors, Tata Consultancy Services and Tata Chemicals – entities that are critical to the group’s revenue and global reach. For instance, Tata Motors generates the highest revenue among all group companies.
Many of the firms under Mistry’s chairmanship are not majority-owned by Tata Sons, which means public shareholders have all the power now. Except for TCS and Tata Investment Corp, the average holdings by Tata Sons is between 22% and 31% in many of these firms, the Mint reported on November 3.
“When the proposal is put to shareholders, the directors are expected to give their recommendations – whether he should continue or not. After that it is for the shareholders to take a call,” said Amit Tandon, founder and MD of Institutional Investor Advisory Services, a Mumbai-based investor advisory firm.
Tandon added: “If a majority of the shareholder vote against his continuing, he will have to step down. Conversely, if a majority support his continuing, he will do so."
The independent directors
Meanwhile, independent directors have already begun weighing in. For instance, on November 4, a statement by The Indian Hotels – a group firm that operates the Taj hotels – said that its independent directors support Mistry.
“Taking into account board assessments and performance evaluations carried out over the years the years, the independent directors unanimously expressed their full confidence in the chairman, Mr Cyrus Mistry, and praised the steps taken by him in providing strategic direction and leadership to the company,” the statement said.
It stated the importance of the shareholders and public making note of the views of independent directors so as to take an “informed decision.”
It doesn’t look Mistry will be stepping down by himself anytime soon, going by his strongly-worded rebuttal to the Tata Sons board following his sacking.
This article first appeared on Quartz.
