Global proxy advisory ISS asks shareholders to vote for Mistry

Global proxy advisory firm ISS has asked TCS shareholders to vote against the move to remove Cyrus Mistry as the director of TCS and other large group companies, saying Tata Sons has not given any "compelling evidence" for his ouster.
Tata Sons which is seeking to remove Mistry from the directorship of its crown jewel TCS on December 13 through an EGM has not given "compelling evidence that the proposal to remove him will be beneficial" for TCS or any other company, the firm said in a recommendation to minority shareholders.
"Neither have they said that Mistry's continued presence on the board is 'expected to have a material negative effect on board governance or future performance'", it added.

Mistry was removed as the chairman of Tata Sons in a surprise move on October 24, following which the holding company of the conglomerate started the exercise of removing him from chairmanship or directorship of group companies.
TCS, which contributes a close to bulk of the group revenue and close to 85 per cent of profit, was the first one where Tata Sons replaced the chairman by removing Mistry and also seeking the shareholder meet to remove him from directorship. Last month, Tata Sons, which owns 73 per cent in the company appointed Ishaat Hussain as the interim chairman.
Five other large flagships -- Tata Steel, Tata Motors, Tata Power, Tata Chemicals and Indian Hotels Company -- have also called EGMs this month over Mistry's removal from their boards.

At least two other proxy advisory firms -- Institutional Investor Advisory Services (IiAS) and SES -- have asked minority shareholders to support the resolution.

Stating that the outcome of the TCS' EGM is a "foregone conclusion" given that Tata Sons holds 73 per cent in it, ISS said TCS "has exhibited very good relative performance over the past four years".
The ISS was also critical of the action taken by Tata Sons against long-time director Nusli Wadia. "Why would a long tenured director like Wadia suddenly act 'prejudicially' or why has tenure become a problem in the last month? Why is it that operating company boards didn't seek Mistry's removal before, or raised issues to Tata Sons, if they thought Mistry was a bad influence on the board?" it said.

The ISS said a functional board and a healthy relationship with the promoter are overarching needs at operating companies but there appears to be differences of opinion in terms of governance and strategic decisions.
"The problem for Tata Sons (or perhaps Ratan Tata) is that Mistry, as its representative on operating company boards, was not pushing for its (or Ratan's) preferred solutions at operating companies," the firm said.
It said many independent director's support to Mistry indicates that he was operating on the basis of a healthy distance from undue pressure.