Mistry saga prompts Tata Sons to define chairman's powers

He'd cease to hold office in Tata Sons, its affiliates and trusts, if he's no longer chairman

Stung by the Cyrus Mistry episode, Tata Sons has balanced the role between the board and executive management, and also defined the role and powers of the chairman in its resolution appointing N Chandrasekaran as executive chairman of the company.

In the board meeting held on February 21, the resolution appointing the new chairman states that if Chandrasekaran, or Chandra as he’s referred to, ceases to hold the office of executive chairman, he would cease being a director of the company and its affiliates as well, without compensation of loss of office. Affiliates would include Tata Group operating companies such as Tata Steel and Tata Consultancy Services (TCS). 

“Upon ceasing to be the executive chairman of the company, Chandrasekaran shall forthwith cease to hold offices held by him in the company and its affiliates without compensation for loss of office and he shall forthwith resign as trustee of any trust connected with the company,” the resolution of the Tata Group’s holding company stated. 

It also added that Chandra would not represent himself as connected with the company and its affiliates without the consent of the company, if he is no longer executive chairman. 

These changes in the terms of appointment are not surprising after the battle that ensued after Cyrus Mistry’s ouster in October 2016. 

“In the background of the bitter tussle with Cyrus Mistry, Tata Sons is leaving no room for ambiguity,” said a Tata Group veteran, who did not wish to be identified. 

“The terms of his appointment are specific, in terms of role and limitations as it could be,” he added.

Besides these conditions, the board also cleared Chandra’s remuneration. Chandra can earn up to Rs 18.7 crore a year in salary and incentive remuneration, according to the resolution. Over and above this income, he will also be eligible to commission, which would be calculated based on the company’s net profit.  

According to the resolution, his basic salary would range between Rs 20 lakh and Rs 40 lakh a month. 

He would be entitled to 85 per cent special allowance, if he stays in company accommodation plus other allowances and perquisites. His incentives would go up to 200 per cent of basic salary.  

He would also be eligible to get commission from the company. This is based on his and the company’s performance. Earlier, as the chief executive of TCS, Chandrasekaran earned Rs 25.6 crore in FY2016 and an additional Rs 10 crore as part of a one-time special bonus the company announced that year.  The payment included commission besides benefits, perquisites and allowances.

Cyrus Mistry, the former Tata Sons chairman who was ousted by the board in October, earned about Rs 16 crore in salary in FY2015, according to most recent figures available, compared with the Rs 21.28 crore that Chandrasekaran got that year at TCS. Tata Sons did not comment on such matters, the company said.

“The executive chairman shall employ the best of his skills and ability and make his utmost endeavours to promote the interests and welfare of the company and its affiliates and to conform and comply with the policies and regulations adopted by the company and all such orders and directions as may be given to him from time to time by the board,” the resolution said. The agreement between Chandrasekaran and the company may be terminated by either of the party giving the other six months’ notice or the company paying six months’ salary in lieu of notice, resolution said.