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An overwhelming majority of shareholders of Tata Consultancy Services (TCS) on Tuesday voted to oust Cyrus Mistry as director from the company’s board at the company’s extraordinary general meeting (EGM) held in Mumbai. According to a late Tuesday evening announcement, the company said 93.11 per cent of the votes were in favour of the resolution to remove Mistry, while 6.89 per cent voted against. The company said holders of 86.71 per cent company’s equity shareholders voted in the EGM.
Tata Sons holds 73 per cent stake in the company and the results were on expected lines. Life Insurance Corporation of India abstained from voting. Calling the results, a big moral victory for Cyrus and governance, the Mistry office said almost 20 per cent of shareholders of TCS — that accounts for more than 70 per cent of non-promoter shareholders — supported Cyrus by voting against the resolution or abstained, expressing disapproval of the promoter actions.
Earlier, Aman Mehta, an independent director (ID) who chaired the meeting, came under fire from a few shareholders for his failure to convince on the reasons for Mistry’s removal from the board of India’s largest software exporter.
Mehta was chairing the meeting as interim chairman of TCS and Tata Sons director Ishaat Hussain recused himself from chairing the EGM.
Mistry did not attend but sent a letter asking the shareholders to vote with their conscience. With the majority stake held by Tata Sons, “this fight is a matter of principle, rather than facing the foregone outcome”, it went. The letter was read out to shareholders at the venue as the meeting began.
Ratan Tata, interim chairman of Tata Sons, with trusted lieutenant R K Krishna Kumar, was in the front row of the venue, listening to the shareholders’ comments, smiling occasionally at flattering comments comparing him with God. Tata received standing ovation from a section of shareholders as he walked into the venue amid tight security.
Expecting trouble from Mistry supporters, the Tatas had arranged for tight security, with every shareholder given an entry pass only after matching their name with the company record. By the time the meeting started, it was packed with Tata supporters. The entire EGM was videotaped.
Many asked Mehta to explain the reasons for removing Mistry from the TCS board. To this, Mehta said the IDs of TCS had met separately and reviewed the situation. And, decided the real issue was about the trust and confidence between the Tata Trust and the TCS chairman. “Once the promoter has lost its confidence, it is appropriate for the chairman to step down. The IDs were unanimous in their decision and did not want the issue to impact the company in a negative way,” Mehta said.
Some shareholders were not happy with Mehta’s reasoning. “We want the actual reasons. Ratan Tata has said he will take the reasons to remove Mistry to his grave but we would like to know the reasons, as TCS was doing well under Mistry,” said shareholder Adil Polad Irani.
Of the 38 shareholders who spoke at the EGM, 34 supported the resolution to remove Mistry but also suggested both Tata and he to resolve the issue amicably, instead of fighting like “cats and cobras”. Many even suggested Tata take help from other business heads such as Anand Mahindra, Kumar Mangalam Birla or Rahul Bajaj as a mediator.
Shareholder Kishore Makhija said he was not happy with the way Mistry was removed. “I have voted against the resolution, as Mistry’s performance has been satisfactory. He did not warrant a removal. The explanation given in the notice says the board of directors of Tata Sons lost confidence in Mistry for a combination of factors. I asked the board to give me these reasons but they did not provide it. If you look at the performance of the company it has been very good,” he said. “The annual report shows all decisions were taken unanimously by the board. Then, why is Mistry is being singled out? The entire board should take responsibility.”
Adding: “I asked the board to explain the biggest shortcoming of Mistry. Looking at the remuneration that IDs get, I want to know if they are actually independent and can take a stand against the promoter.”
Irani raised another concern, on who’d succeed TCS’ managing director and chief executive, N Chandrasekaran, if he was made chairman at Tata Sons. “What will happen to TCS? Also, why is Tata writing letters to the board without being on board?” he asked, on the letter sent by Ratan Tata a few days earlier to all TCS shareholders.
Some also raised questions on the role of the selection committee which appointed Mistry in the first place and asked why a Tata family member was not being inducted on Tata Sons’ board. “The selection committee should have earlier selected Noel Tata for this role. If they would have done their job, we would not he having this meeting,” said S A Khanolkar.
Noel, shareholders said, had done a far better job in his two companies without inviting any controversies. Ratan Tata did not react to these suggestions.
Ratan Tata, interim chairman of Tata Sons, with trusted lieutenant R K Krishna Kumar, was in the front row of the venue, listening to the shareholders’ comments, smiling occasionally at flattering comments comparing him with God. Tata received standing ovation from a section of shareholders as he walked into the venue amid tight security.
Expecting trouble from Mistry supporters, the Tatas had arranged for tight security, with every shareholder given an entry pass only after matching their name with the company record. By the time the meeting started, it was packed with Tata supporters. The entire EGM was videotaped.
Many asked Mehta to explain the reasons for removing Mistry from the TCS board. To this, Mehta said the IDs of TCS had met separately and reviewed the situation. And, decided the real issue was about the trust and confidence between the Tata Trust and the TCS chairman. “Once the promoter has lost its confidence, it is appropriate for the chairman to step down. The IDs were unanimous in their decision and did not want the issue to impact the company in a negative way,” Mehta said.
Some shareholders were not happy with Mehta’s reasoning. “We want the actual reasons. Ratan Tata has said he will take the reasons to remove Mistry to his grave but we would like to know the reasons, as TCS was doing well under Mistry,” said shareholder Adil Polad Irani.
Of the 38 shareholders who spoke at the EGM, 34 supported the resolution to remove Mistry but also suggested both Tata and he to resolve the issue amicably, instead of fighting like “cats and cobras”. Many even suggested Tata take help from other business heads such as Anand Mahindra, Kumar Mangalam Birla or Rahul Bajaj as a mediator.
Shareholder Kishore Makhija said he was not happy with the way Mistry was removed. “I have voted against the resolution, as Mistry’s performance has been satisfactory. He did not warrant a removal. The explanation given in the notice says the board of directors of Tata Sons lost confidence in Mistry for a combination of factors. I asked the board to give me these reasons but they did not provide it. If you look at the performance of the company it has been very good,” he said. “The annual report shows all decisions were taken unanimously by the board. Then, why is Mistry is being singled out? The entire board should take responsibility.”
Adding: “I asked the board to explain the biggest shortcoming of Mistry. Looking at the remuneration that IDs get, I want to know if they are actually independent and can take a stand against the promoter.”
Irani raised another concern, on who’d succeed TCS’ managing director and chief executive, N Chandrasekaran, if he was made chairman at Tata Sons. “What will happen to TCS? Also, why is Tata writing letters to the board without being on board?” he asked, on the letter sent by Ratan Tata a few days earlier to all TCS shareholders.
Some also raised questions on the role of the selection committee which appointed Mistry in the first place and asked why a Tata family member was not being inducted on Tata Sons’ board. “The selection committee should have earlier selected Noel Tata for this role. If they would have done their job, we would not he having this meeting,” said S A Khanolkar.
Noel, shareholders said, had done a far better job in his two companies without inviting any controversies. Ratan Tata did not react to these suggestions.
