Much has been said about the removal of Cyrus Mistry as Chairman of Tata Sons. The discourse has touched upon aspects from standards of corporate governance to the reasons, fairness, and legality of the decision.
Inevitably, any analysis of this episode must take into account the starting position as is publicly known.
The Board of Tata Sons collectively expressed their loss of confidence in Mr. Mistry's leadership. It has been reported that prior to the board meeting at which the resolution to replace him was proposed and passed, he was requested to step down. Had he seen "the writing on the wall" and submitted his resignation, there would have been no controversy. But Mr. Mistry chose not to step down and decided to question the decision. The Tata Sons board then formally replaced him. The immediate statement issued by Tata Sons was dignified and measured. It stated that the Board had decided to "replace" Mr. Mistry as Chairman. Ratan Tata took charge as interim Chairman.
It is further reported that at the board meeting, Mr. Mistry termed the move "illegal". But so far he has not taken any legal action to challenge the illegality before a competent court or tribunal. Instead, Mr. Mistry chose to counter the "merits" of the decision in a letter to the members of the Board and went public with it even though the letter was marked "confidential". (Assuming that it was not leaked by his office, he should have known that the letter would find its way into the public domain.)
Objectively speaking, Mr. Mistry is entitled to question the legality if he is so advised. But questioning the legality of the decision has its limitations - one has to find specific grounds in law and then meet the tests the law would require in order to hold illegal the decision of Mr. Mistry's removal. Mr. Mistry's advisors perhaps realise this. The space to manoeuvre in this regard is limited: the legality of the decision can at best be questioned on grounds of the procedure adopted, if there was any defect in it. That boils down to the decision-making process i.e. how the decision was taken, not the decision itself. This limits the discourse because it has to be confined to specifics, both on facts and on law.
Mr. Mistry's letter to the Board members questions why the decision was taken. But why the decision was taken has nothing to do with the issue of legality. No court or tribunal will sit in appeal over the personal and collective judgment of the Tata Sons directors as to why they no longer have confidence in Mr. Mistry's leadership.
A lot has been said about Mr. Mistry not getting adequate opportunity to defend himself. This itself is a flawed position to take. First, the decision to appoint or remove the chairman is not an adversarial process. Second, when one seeks the right to defend, it implies that at the end of the defense, there will be a judgment on who is right and who is wrong. Who would decide that?
Mr. Mistry is a seasoned businessman and is not new to the corporate world or board rooms. He would know that it is not for the first time, including within the Tata group, that a chief executive has been replaced or removed, although it may be the first time that the replaced chief executive has reacted in this manner, and that way is, to borrow a phrase from Mr. Mistry's letter to the board, perhaps "unprecedented in the annals of corporate history".
The problem with the right-to-defend construct in matters of removal of chairman of a board is that it looks at the reason for removal, such as loss of confidence, as some sort of "allegation". Unless the stated reason for removal is financial fraud or gross misconduct, reasons are not allegations that need to be explained or defended. It is ultimately a matter of a view point/best judgment, with which one can choose to disagree, but should respect and accept. That's what Mr. Mistry should have done. Instead, he chose a combative "I-am-right-you-are-wrong approach".
If Mr. Mistry's advisors are looking for mathematically precise reasons for his removal then it is not possible, just as it is not possible to explain, objectively, why Mr. Mistry was finally chosen over other candidates who were considered, or for that matter, candidates who may have been deserving but were not even considered, for the position. Four years ago, he was handpicked for the responsibility. Today if the board has taken a decision to replace him, why this hue and cry?
Why, in law, merits of a corporate decision of this kind are not made justiciable, we must ask. The answer is simple: because it can't be. A corporate board replacing its chairman (or shareholders appointing or replacing a director) is not - it cannot be - a matter of any precise, pin-point reasoning. It is a matter that is best left to the collective wisdom - and discretion - of the board and shareholders, who in the absence of unanimity, decide by majority. This is the way it works the world over. A problem arises when we mix up this fact of corporate life with idealistic notions of fairness.
While in office, Mr. Mistry himself would have effected changes at the senior management level, including selecting candidates for directorship of Tata companies. As is reported, there were criticisms, through whispers of course, of his judgment for talent and some of the people he chose as his close advisors. Mr. Mistry has not explained in public why he chose those people. It was his prerogative as chairman that he exercised. Today, the Tata Sons Board and the Tata Trusts (the principal shareholders) have exercised the prerogative which they have. Undoubtedly, it was an extraordinary decision and its suddenness was bound to evoke some reactions. But then, this decision would have been so - extraordinary and sudden - no matter how and when it was made. The media frenzy and welter of allegations and counter-allegations that ensued is largely, if not entirely, Mr. Mistry's own making.
If Mr. Mistry was questioning his removal from the board of Tata Sons, of which his family owns about 18%, it would still be understandable. But he chose to carry his fight to the listed operating companies in which he owns nil or negligible equity. After he was removed as chairman of Tata Sons, in keeping with the long-standing convention he should have, of his own accord, stepped down from the boards of those companies. Those who are questioning the actions of Tata Sons to remove him from those companies forget that Mr. Mistry was not invited to join these boards in his individual capacity because of his independent stature or professional capabilities alone. Nobody, including Mr. Mistry and the independent directors who have come out in his support, can deny that but for being the chairman of Tata Sons, the promoter shareholder, Mr. Mistry might not even have become a director, much less the chairman of those companies. The sole edifice of Mr. Mistry's chairmanship and even directorship of those companies was his association with Tata Sons.
Seen in this perspective - how and why Mr. Mistry got his position in the listed Tata companies in the first place - the concerns for corporate governance in the Tata Group would appear to be largely a post-truth debate.
If Mr. Mistry's advisors feel that through that initial letter and subsequent press statements they have cemented his place in corporate history as a great corporate leader then they are hopelessly wrong. Questioning past business decisions, with the benefit of hindsight of course, and terming them "questionable", is itself highly questionable both on merits and propriety. Unless Mr. Mistry's advisors wanted him to become a whistle-blower (though that would be comical, to say the least), making public and that too selectively, specific instances of decision-making (Nano, Airlines), or individual opinions of directors (Air Asia), seems petty and would arguably amount to an egregious breach of confidentiality. Those who advised Mr. Mistry to rake up the "legacy hot-spots" forgot that in the process they are causing an irreparable harm to the long-cherished Tata legacy which goes beyond profits and write-downs.
Mr. Mistry might have been genuinely concerned about certain businesses. But then he should have gracefully stepped down and left a constructive, not accusatory, note with suggestions and offering to help in whichever capacity the Tata Sons management deemed fit. That would have been statesman-like, and in sync with his own standing.
There is a saying: "Speak when you are angry and you'll make the best speech you would ever regret". Mr. Mistry might have just done that.
(The author is a Delhi based lawyer and advises the Tata Group. Views expressed here are the author's own.)Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.