Cyrus Mistry exits Tata Group: Such a decision unheard of, say 'worried' experts

Experts say Tata Group should give reasons and circumstances that led to Mistry's removal

Going back to an insider with little experience probably backfired for the salt-to-steel Tata group. Four years after he took over as the chief of Tata Sons, the holding company of the Tata group, Cyrus Mistry had to say ta-ta to the chairman’s office on Monday.

Proxy advisory firms view this as a case of “failed experiment” in succession.

 
“Obviously, it is an experiment in succession that did not work. The reasons are still unclear. They had taken years to zero in on Mistry after an international search. And, this new group has only four months (to choose a new chairman),” said Shriram Subramanian, founder, Ingovern Research Services.

According to Subramanian, the continuous stress the group companies had gone through could have triggered the move, unless there is something more serious. “His (Mistry’s) experience in handling such a diversified group with numerous entities was doubtful. He was parachuted into running multiple entities. He should have been groomed,” he added.

J N Gupta of Stakeholders Empowerment Services said: “Such a sudden change is unheard of in the history of the Tata group. The reason for such a move is unknown. And, this unknown worries us.”

Gupta said as a good governance practice, Tatas should explain the circumstances and reasons for the decision. Experts also wondered if the decision would lead to or was the result of dynamics between the Tatas and the Mistry family.

Although Mistry has stepped down, his father Pallonji Shapoorji Mistry remains the single-largest individual shareholder in Tata Sons.

“Cyrus Mistry resigns as Chairman, Tata Sons. @RNTata2000 back. An experiment in succession that failed at the Tatas? Leadership vacuum?” Ingovern tweeted soon after the decision.

In a statement, Tata Sons announced that its board replaced Cyrus Mistry as chairman of Tata Sons. The decision was taken at a board meeting held in Mumbai. “The board has named Ratan N Tata as interim chairman of Tata Sons. The board has constituted a selection committee to choose a new chairman. The committee comprises Ratan Tata, Venu Srinivasan, Amit Chandra, 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,” it added.