Demystifier : ED Original where the content is written in such a way that it is knowledgeable and easy to comprehend at the same time.
October 24, 2016 marked the beginning of one of India’s biggest boardroom battle after Cyrus Mistry was ousted from his position of Chairman.
What has followed since then is $10 billion loss in shareholder value for Tata sons, resignation of Mistry from various Tata group companies’ boards, lawsuits filed by Mistry, the entire leadership and board shakeup, Wadia’s defamation suit, and more is in store.
Tata’s so called values and ethos
Tata Sons, which hold the majority stake(about 72%) in the $103-billion Tata group, claim that Mistry was violating the ethos and values of what Tata group stands for and was therefore detrimental for its business objectives.
This statement is encoded and its decoded version means that Tata group, which is generally perceived to be bureaucratic in nature and has employee friendly a.k.a. Sarkari job policies, is incompatible with Cyrus Mistry, who doesn’t have Tata as its last name and who wants its business divisions to be run more professionally and therefore couldn’t hold those values.
Cyrus(not broacha) made a ‘bakra’- of himself
On the other hand, Cyrus Mistry, though holds 18% stake, which is single largest shareholding in Tata group albeit minority stake as compared to the 72% majority stake of Tata Sons, waged a lost battle from 2012, the time he was appointed the chairman of the group.
Instead of transforming the organization, as he didn’t have majority stake, he should have focused on strengthening and sustaining the top and bottom line reasonably by adopting measures that aligned with the so called ‘values’ of the Tata Group.
By choosing the former, he created a situation where he became the reason for his departure.
And now, by extending with this fiercely long drawn battle by dragging Tatas to the courts, Mistry seems to have given to his ego and it would lead to losses for both Tata and himself at the end of it.
Tata-Mistry 1st page news everyday for months to come..argh!
Firstly, Mistry has filed a suit for his illegality of his ouster.
Let’s suppose he wins in the court and the court directs Tata group to reinstate him as the chairman-an extreme situation, will he still be able to command the authority with all the intense animosity between both of them?
Will he be able to benefit the business in any way?
On the other hand, if Tatas knew that they weren’t able to convince him to resign then they could have amicably resolved the dispute by following all the legal codes to prevent him from questioning his exit and could have factored in his revolt later.
Secondly, his allegation of breaches of governance and misconduct within Tata ventures, Corus deal and Tata Motors raises serious questions on both his veracity and Tatas’ as he could have raised these issues earlier when he was at the helm of Tata Group.
Raising all these issues now, highlights the vindictive nature of Mistry rather than his actual ethical stance as he could have very well been the contributor to those decisions.
Now, this long drawn battle, which might very well end in the Supreme court, could end with Mistries losing their stake in the Tata group, loss in reputation, values and wealth of the Tata group, its shareholders, its employees and their families and all the external stakeholders associated.
This situation could have been very well avoided between both the parties by forging a deal before October 24th that could have benefitted both.
Image Credits: Google Images
Rishank is currently pursuing MBA from NMIMS, Mumbai.He likes reading and writing and loves challenging the status quo by voicing his eccentric opinions.
Views presented in the article are those of the author and not of ED.