In a surprise move, Tata Sons have removed Cyrus Mistry as its Chairman, nearly four years after he took over the reins of the over USD 100 billion saltto software conglomerate. The decision was taken at a Board meeting held in Mumbai. Tata Sons today announced its board has replaced Mr Cyrus P Mistry as Chairman of Tata Sons. The decision was taken at a board meeting held here today,” a Tata Sons statement said. Ratan Tata, who Mistry had replaced on December 29, 2012, has been appointed as interim Chairman for four months during which a search committee will look for a replacement. The search committee comprises of Ratan Tata, Venu Srinivasan, Amit Chandra, Ronen Sen and Lord Kumar Bhattacharya. The committee has been mandated to complete the selection process in four months. CEOs at the operating company level have not been touched in the rejig. There were no reasons given for the change of leadership of the man who was brought in with much fanfare but it is believed that Tata Sons was unhappy with Mistry’s approach of shedding non-profit businesses, including the conglomerate’s steel business in Europe, and concentrating only on cash cows.

In the case of Tata Sons, the target was the chairman, Mr. Mistry. The Tata issue turned legal because there was definite action by the controlling shareholder. Do the owners or founders have the right or obligation to an organisation that they have assiduously built over many summers? More precisely, can the board or management just brush aside the view of a ‘quality shareholder’ (Mr. Tata and Mr. Murthy in these instances)? It is never in doubt that Mr. Tata is a globally revered name. Events at the Tata Empire have subsequently proved that shareholder supremacy prevails in the end. The succession at Tata Sons has turned out to be a smooth affair, and the operating companies did not see any performance dislocation in those troubled times. Analysts also point to a core difference between these two cases. In the case of Tata Sons, the owner and quality shareholders were pitched against a chairman. Between Cyrus Mistry’s abrupt and shocking firing as chairman of Tata Sons Ltd (on the first date) and his removal from the board (on the second), though, he has raised enough questions about the Tata group (never mind that he was part of the establishment from 2006 and only chose to raise these when things didn’t go his way) to change most people’s perception of what was once India’s most respected business group.

For another, it helped the group avoid being caught in scandals that ensnared lesser companies. For instance, when the government’s auditor was looking at companies that benefited from the 2G scam by getting licenses and spectrum and then partnering with a foreign firm, it ignored the only case where such a partnership involved a sale of equity by the Indian company’s promoters. That was Tata Teleservices Ltd’s stake sale to NTT DoCoMo Inc and the auditor thought it didn’t deserve a closer look because Ratan Tata is an honourable man.

That halo — not dented by the group’s use of C Sivasankaran as a preferred dealmaker or Nira Radia as flak-catcher and spin doctor rolled into one — is now gone. There are those who believe it should have never been there, but that is arguable. There is much to admire about the Tata group, including (and not the least), the Tata Trusts, which are the eventual beneficiaries of the profits of the conglomerate, and the work that they do. Events of the past three months have raised questions not just about his firing but also his hiring. Not to question Mistry’s abilities but it isn’t clear why the selection committee of Tata Sons thought he would make a good chairman in the first place. Maybe the committee was swayed by his family’s 18.4% stake. Or maybe it thought that the soft-spoken and young (he was 45 when he was named to the post) would listen to Ratan Tata, the then chairman of Tata Sons.

—Prashant Tewari, Editor-in-Chief

In a surprise move, Tata Sons have removed Cyrus Mistry as its Chairman, nearly four years after he took over the reins of the over USD 100 billion saltto software conglomerate. The decision was taken at a Board meeting held in Mumbai. Tata Sons today announced its board has replaced Mr Cyrus P Mistry as Chairman of Tata Sons. The decision was taken at a board meeting held here today,” a Tata Sons statement said. Ratan Tata, who Mistry had replaced on December 29, 2012, has been appointed as interim Chairman for four months during which a search committee will look for a replacement. The search committee comprises of Ratan Tata, Venu Srinivasan, Amit Chandra, Ronen Sen and Lord Kumar Bhattacharya. The committee has been mandated to complete the selection process in four months. CEOs at the operating company level have not been touched in the rejig. There were no reasons given for the change of leadership of the man who was brought in with much fanfare but it is believed that Tata Sons was unhappy with Mistry’s approach of shedding non-profit businesses, including the conglomerate’s steel business in Europe, and concentrating only on cash cows.

In the case of Tata Sons, the target was the chairman, Mr. Mistry. The Tata issue turned legal because there was definite action by the controlling shareholder. Do the owners or founders have the right or obligation to an organisation that they have assiduously built over many summers? More precisely, can the board or management just brush aside the view of a ‘quality shareholder’ (Mr. Tata and Mr. Murthy in these instances)? It is never in doubt that Mr. Tata is a globally revered name. Events at the Tata Empire have subsequently proved that shareholder supremacy prevails in the end. The succession at Tata Sons has turned out to be a smooth affair, and the operating companies did not see any performance dislocation in those troubled times. Analysts also point to a core difference between these two cases. In the case of Tata Sons, the owner and quality shareholders were pitched against a chairman. Between Cyrus Mistry’s abrupt and shocking firing as chairman of Tata Sons Ltd (on the first date) and his removal from the board (on the second), though, he has raised enough questions about the Tata group (never mind that he was part of the establishment from 2006 and only chose to raise these when things didn’t go his way) to change most people’s perception of what was once India’s most respected business group.

For another, it helped the group avoid being caught in scandals that ensnared lesser companies. For instance, when the government’s auditor was looking at companies that benefited from the 2G scam by getting licenses and spectrum and then partnering with a foreign firm, it ignored the only case where such a partnership involved a sale of equity by the Indian company’s promoters. That was Tata Teleservices Ltd’s stake sale to NTT DoCoMo Inc and the auditor thought it didn’t deserve a closer look because Ratan Tata is an honourable man.

That halo — not dented by the group’s use of C Sivasankaran as a preferred dealmaker or Nira Radia as flak-catcher and spin doctor rolled into one — is now gone. There are those who believe it should have never been there, but that is arguable. There is much to admire about the Tata group, including (and not the least), the Tata Trusts, which are the eventual beneficiaries of the profits of the conglomerate, and the work that they do. Events of the past three months have raised questions not just about his firing but also his hiring. Not to question Mistry’s abilities but it isn’t clear why the selection committee of Tata Sons thought he would make a good chairman in the first place. Maybe the committee was swayed by his family’s 18.4% stake. Or maybe it thought that the soft-spoken and young (he was 45 when he was named to the post) would listen to Ratan Tata, the then chairman of Tata Sons.

—Prashant Tewari, Editor-in-Chief