The internet has gone crazy about Nirmalya Kumar’s latest blog post about how Cyrus Mistry was fired as Tata’s Chairman. Nirmalya Kumar, Former Group Executive Council member at Tata Sons has revealed a sequence of events on 24 October 2016, the day when Cyrus Mistry was relieved from his services.
Nirmalya Kumar was hired by Cyrus to head strategy for the Tata Group, a position that had required Nirmalya to intensively interact and stay close to him. In his latest blog, published on 21 October, 2017; a year after Cyrus’ removal, Kumar shed light on the sequence of events held that day!
THE GRAPEVINE
Cyrus Mistry was in his Bombay House 4th floor office examining what seemed like a routine agenda for the Tata Sons board meeting that was scheduled to start in five minutes at 14:00 hours.
He had already heard through ‘grapevine’ that “some of the board members had an unscheduled informal meeting earlier that morning” the details of which were yet unknown to him. He did not suspect anything unusual as such, as the previous weeks were just usual, with trips and meets.
‘I AM BEING SACKED’
A knock on the door, and to his surprise, enter his predecessor, Ratan Tata and Tata Sons board member Nitin Nohria. Cyrus welcomes them and asks them to take the two chairs opposite him. Nitin Nohria begins by proclaiming that “Cyrus as you know the relationship between you and Ratan Tata has not been working.”
Nohria further said that Tata Trusts have decided to move a board resolution removing Cyrus as Chairman of Tata Sons; and he was offered either to resign or face the resolution in the upcoming meeting.
“Ratan Tata chimes in at this stage to say he is sorry that things have reached this stage.”
THE BOARD MEETING
Taking place on his chairman’s seat, the one slightly elevated and larger compared to the rest. Mistry welcomed Ratan Tata(who had never attended a board meeting since Cyrus had become Chairman) and informed that Tata and Nohria have something to share prior to considering the previously circulated agenda.
Amit Chandra, a Tata Trust Nominee, apprised the board that at Trust Directors meeting held earlier, the board has agreed to move a motion to request Mistry to step down as Executive Chairman of Tata Sons because the Trusts had lost confidence in him.
Although Cyrus argued that a 15 day notice is required beforehand and the action was “illegal”; yet Amit Chandra informed the board that the legal opinion obtained by the Trusts stated such a notice was not necessary.
Venu Srinivasan seconded the proposal while Ishaat Hussain and Farida Khambata said they would abstain on this motion; but were voted out as six members(Ajay Piramal, Amit Chandra, Nitin Nohria, Ronen Sen, Venu Srinivasan, Vijay Singh) voted for the motion. Vijay Singh was installed as Chair for the meeting.
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Venu Srinivasan then proposed the inclusion of additional matters on the Agenda by moving the Resolution below, which was seconded by Ronen Sen:
THE RESOLUTION
RESOLVED THAT the consent of the Board be and is hereby accorded, to consider and resolve upon, in this meeting of the Board, the following matters which were not included in the Agenda circulated for this meeting of the Board:
1. Replacement of Mr. Cyrus P. Mistry as the Chairman of the Board and from each committee of the Board;
2. While the Board has adopted and put in place certain age criteria for retirement of Directors of the Company, to approve the cessation of application of the age criteria for retirement of Directors in relation to the Company;
3. Re-constitution of the Nomination and Remuneration Committee to consist of the following Directors: (i) Mr. Ronen Sen (Independent Director); (ii) Mr. Ajay Piramal (Independent Director); (iii) Mrs. Farida Khambata (Independent Director); (iv) Mr. Vijay Singh; and (v) Mr. Venu Srinivasan;
4. Appointment of Mr. Ratan N. Tata as Additional Director;
5. Election of Mr. Ratan N. Tata as Interim Chairman of the Board until selection and appointment of a new Chairman of the Board in terms of the Companies Act, 2013 and the Articles of Association of the Company;
6. To take appropriate steps in terms of the Companies Act, 2013 and the Articles of Association of the Company to appoint a new Chairman, including by formation of a Selection Committee comprising of: (i) Mr. Ratan N. Tata (Nominee of Tata Trusts); (ii) Mr. Amit Chandra (Nominee of Tata Trusts); (iii) Mr. Venu Srinivasan (Nominee of Tata Trusts); (iv) Mr. Ronen Sen (Independent Director); and (v) Lord Kumar Bhattacharya (Independent Outside Person).; and
7. Until selection and appointment of a new Chairman of the Board in terms of the Companies Act, 2013 and the Articles of Association of the Company, to vest substantial powers of management of the Company with Mr. F. N. Subedar, Chief Operating Officer, and/or one or more senior officials and/or Directors of the Company, subject to the overall supervision and direction of the Board, in such manner as the Board may decide from time to time.
Each of these resolutions was voted on in turn. While different board members proposed and seconded the individual resolutions, the voting pattern was identical across them.
“Khambata abstained on each, Mistry objected to each as being illegal, while the others voted for them. It was all over in minutes, no explanations and no opportunity for Cyrus Mistry to prepare a rebuttal.”
THE AFTERMATH
Cyrus returned his office and began packing up by 15:00 hours. He queried Subedar on whether he needed to return the next day. Subedar checked with Ratan Tata and reported that it was unnecessary.
Cyrus then called his childhood friend and top notch lawyer, Apurva Diwanji, to help him with the situation; who was there within 10 mins. Realizing the crowd of Press outside Bombay House, they took a side exit which was rarely used.
They soon realized that they will be needing a PR Agency and a lawyer immediately. What they did not know was that Ratan Tata has already hired the top 6 PR Agencies and booked many of most prominent lawyers in the country.
Press Release by Tata
“Mumbai: Tata Sons today announced that its Board has replaced Mr. Cyrus P. Mistry as Chairman of Tata Sons. The decision was taken at a Board meeting held here today.
The Board has named Mr. Ratan N. Tata as Interim Chairman of Tata Sons.
The Board has constituted a Selection Committee to choose a new Chairman.
The Committee comprises Mr. Ratan N. Tata, Mr. Venu Srinivasan, Mr. Amit
Chandra, Mr. Ronen Sen and Lord Kumar Bhattacharyya, as per the criteria in the Articles of Association of Tata Sons. The committee has been mandated to complete the selection process in four months.”
The news broke across the TV Channels immediately and spread like a fire. It was also reported that three members of Mistry’s top team had been asked to put in their papers. While not the Chairman of Tata Sons, Mistry was still a board member of Tata Sons and the Chairman of the Board of Directors of most of the major group companies. The media started speculating whether Mistry would step down as Chairman of these companies. This was intriguing since the first board meeting coming up was for Tata Global Beverages Limited (TGBL) to be held on 26th October at Bombay House.
The initial contract under which Cyrus was serving as the Chairman had been passed via a shareholder resolution of Tata Sons. It was due to expire on 31 March 2017. Instead of the sudden, no warning dismissal, the board could have just let the clock run out in five months. By eschewing the public humiliation of Cyrus Mistry, the bloody aftermath that followed could have been avoided.
DISBANDING OF GEC
On taking over as Chairman, Cyrus had taken a year to put his leadership team in place. Called the Group Executive Council (GEC), it comprised of two old Tata hands and three people recruited from outside the group. Kumar was hired to head strategy for the Tata group, a position that had required me to intensively interact with Cyrus as we formulated Tata’s strategy until 2025.
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At 21:00, Kumar got a call from Subedar, with whom he had worked closely. On call, he simply said: “it is my unpleasant duty to say your services are no longer required”. No explanation. Kumar queried does this mean he did not need to show up tomorrow morning? An affirmative reply, and that was it. Madhu and NS Rajan, the other two members of GEC received similar calls.
‘I JUST GOT FIRED’
“It was the start of a furious two months, where I worked harder than ever with Madhu to help Cyrus wage a battle against the enormously powerful Tata machine until it moved to the courts. Many of you have read my blog of the week following my firing entitled, I Just Got Fired! The year that has passed required me to dig deep, but that is a story for another week.”
He also said that in Tata-Mistry fight it was the PR firms who came out as winners. He said: “The only winners as far as one could see were the public relations companies and lawyers, who are still having a field day.