source from：wsj
BUSINESS
Tata’s Ugly Leadership Fight Drags On
Ousted chairman, Cyrus Mistry, accuses directors of being tools of company’s founding family

By ERIC BELLMAN and  SHEFALI ANAND
Nov. 21, 2016 7:00 a.m. ET
1 COMMENTS
NEW DELHI—When ousted in late October, the chairman of one of India’s largest conglomerates responded with a withering missive to directors—accusing them of being tools of the company’s founding family at the expense of other shareholders.

In a five-page letter, the dismissed executive, Cyrus Mistry, complained of a “total lack of corporate governance” at Tata Group, whose businesses range from outsourcing to auto making, and said the board was failing “to discharge the fiduciary duty owed to stakeholders.”

Tata Sons Ltd.—the holding company at the heart of the sprawling commercial empire, which includes Jaguar Land Rover Automotive PLC and Tetley Tea—responded in a nine-page news release on Nov. 10, denying Mr. Mistry’s accusations and saying he was dismissed for failing to bring more growth to the group.


Tata companies each still have to pick sides and decide to either eject or embrace Mr. Mistry, who is a major shareholder and chairs more than five of the conglomerate’s biggest firms. He doesn’t plan to go quietly, said people familiar with his plans, and is hoping independent directors and shareholders will agree he is still the right man to modernize Tata companies.

The second battle in the war for control of India’s best-known brand started in early November as Mr. Mistry was replaced as the chairman of Tata Consultancy Services Ltd., an outsourcer that accounts for the largest slice of the group’s revenues and profits. Tata Sons owns 73% of TCS so it could unilaterally make that decision. It will not be as easy in other group companies where the holding company generally owns less than a 35% stake.

The surprise announcement of Mr. Mistry’s ouster and the ugly fight that has followed has confused and bewildered Tata executives and employees as well as investors.


“Investors should have had at least some sense that there was this brewing discontent with Cyrus Mistry,” but there was no hint of trouble, said Hetal Dalal, chief operating officer at Institutional Investor Advisory Services in Mumbai. “That lack of communication has caused a whole entire ‘he said, she said’ [string of] rebuttals which is confusing stakeholders all the more.”

The sudden scuffle is a cautionary tale, investors and analysts said, demonstrating the extent of family control and lack of transparency even in one of India’s most international and professionally managed enterprises.

Indian groups often take a paternalistic approach to their businesses, with profitable enterprises helping subsidize money losers. Too often, companies and conglomerates are tightly controlled by a small group of founders or their offspring, critics say, with little consideration of the interests of minority shareholders.

Both sides at Tata argue they are trying to improve the performance of the group, which has become increasingly dependent on Jaguar Land Rover and outsourcer TCS, while most of the group’s other businesses have soured.

The board of Tata Sons explained its action in a short statement when it announced it was firing its chairman, saying it was acting in the “long-term interests of the company.” The board suggested investors didn’t have to worry because Mr. Mistry’s predecessor, Ratan Tata, 78 years old and a member of the founding family, was coming out of retirement as interim chairman.

Supporters of Mr. Mistry, 48, who took charge of the group in late 2012, say that he ran afoul of the old guard because he was trying to halt some of Mr. Tata’s pet projects to increase profitability. Mr. Mistry and a small group of advisers he brought in from outside the group wanted to streamline and modernize the group but that involved taking a hard look at some of the massive investments made by Mr. Tata during his more than 20 years as chairman. They were trying to sell hotels in the U.S., steel operations in the U.K. and wind down Mr. Tata’s $2,000 minicar project that had grabbed global attention as the world’s cheapest car but then struggled to make money.

Mr. Mistry’s road map for the group was “diametrically opposed to Mr. Ratan Tata’s own vision of the Tata House being a sprawling empire with interests and fingers in every pie.” said Rajiv Kumar, an economist at the Centre for Policy Research in New Delhi.

The Tata Sons letter last week said the decision was not about Mr. Tata’s legacy but agreed that Mr. Mistry’s actions didn’t fit with the Tata way. The Tata Sons news release suggested shutting things down to boost profitability wasn’t part of the group’s traditional culture and reprimanded Mr. Mistry for “his absolute disregard of longstanding Tata traditions, values and ethos.”

How the battle between the Mistry and Tata camps plays out remains to be seen, but investors and insiders say it risks harming the reputation of not just Tata, but corporate India as a whole.

For those who see Mr. Mr. Mistry as trying to move Tata from a paternalistic to a professional and profitable group, his fight to continue to implement his planned changes could define the group’s ability to improve its performance.

“I wonder if this is going to be an inflection point where the capital markets start saying maybe there’s a better way to allocate capital,” than using sprawling diverse groups in India, said Puneet Manchanda, professor of marketing at the Ross School of Business, University of Michigan.