From Raise And Praise In June To Sacking In October: Why Did The Tata Sons Board Turn On Mistry?
Exclusive excerpts from the minutes of Tata Sons June 28 board meeting.
By law, the board of every large public company is required to set up a Nomination and Remuneration Committee (NRC). Tata Sons Ltd. has one too.
On June 28, the NRC, consisting of two Independent Directors Ronen Sen and Farida Khambata and Tata Trusts Nominee Director Vijay Singh, met with Tata Sons Executive Chairman Cyrus Mistry, according to people close to the developments.
In that meeting, the first one in the financial year 2016-17, the NRC evaluated the performance of Mistry, as required by the Companies Act, 2013 and detailed in a story BloombergQuint did.
According to an excerpt of the minutes of the meeting that has come into BloombergQuint's possession, Mistry presented a self-performance report, outlining the various initiatives taken by him during the year in the interest of the group.
Thereafter Vijay Singh mentioned that Tata Motors Ltd. has come up with some of their best models in recent years.
Farida Khambata and Ronen Sen complimented Mistry on his performance as chairman. Sen added that based on the site visits he had undertaken, Mistry had earned the respect not only of CEOs and senior management but also of operational personnel.
In the meeting, the members ‘unanimously recorded their recognition of his significant performance across group companies and expressed their appreciation of his multifaceted initiatives aimed at preserving and promoting cohesive functioning of the Group in accordance with its distinctive values’.
In the same meeting, the NRC agreed to increase Mistry's basic salary to Rs 19.80 lakh per month starting April 1, 2016, and a pay him a commission of Rs 11.65 crore for FY16.
Contrary to the praise and raise they offered in June 2016, two members of the NRC, Vijay Singh, and Ronen Sen, voted to dismiss Mistry in the board meeting on October 24. Farida Khambata abstained from voting, along with another director Ishaat Hussain.
The excerpts of the NRC meeting minutes add to the mystery surrounding the events of October 24. So far, the Tata Sons board has shared no specific reasons for sacking Mistry, except to say that he had 'overwhelmingly lost the confidence' of the board, in a media statement on October 27.
The Companies Act, 2013, requires, for the first time in India, the performance evaluation of all directors on the boards of listed and large public companies. The provision has been in effect for two years and the performance evaluation of Mistry over those two years could shed light on the relationship between the board and him.
BloombergQuint has access to the minutes of just one evaluation meeting. If the preceding evaluation meetings and reports are consistent with the mood in the first meeting of FY17, it makes matters curiouser.
What happened between June and October 2016 that prompted the board to replace Mistry? Especially since of the six members who voted to oust him, three had been appointed as directors only at the end of August, giving them two months and one intervening board meeting on September 15, to decide that the chairman must go.
When asked to confirm the meeting minutes and comment on the developments, a Tata Sons spokesperson maintained that "The board in its collective wisdom decided it may be appropriate to consider change for the Tata Sons and Tata Group," in a phone conversation with BloombergQuint.