The abrupt replacement of Tata Sons chairman Cyrus Mistry, on the recommendation of the principal shareholder, Tata Trusts, has fuelled speculation on whether there were differences of views between the two large shareholders of Tata Sons.
The Shapoorji Pallonji family is the largest shareholder in Tata Sons owning 18.5% of the equity. Tata Trusts, which is chaired by Ratan Tata, is the principal shareholder.
Incidentally, Ratan Tata has been appointed as the interim chairman of Tata Sons, coming back to the post that he exited four years ago. The Tata Sons board has also formed a selection committee tasked to finding a chairman for the Tata Group. The committee has five members, of which three (Ratan Tata, industrialist Venu Srinivasan and former managing director of Bain Capital Amit Chandra) are nominees of Tata Trusts, one (former India ambassador to the US Ronen Sen) is a nominee of Tata Sons and one external candidate, Lord Kumar Bhattacharya.
The formation and composition of the committee is stipulated in the Articles of Association of Tata Sons.
Mistry’s tenure of four years at one of India’s oldest business groups, is the shortest with the mode of his replacement also widely described as unprecedented. A Tata Trusts spokesperson, however, tried to play down the announcement. “It is a forward looking move and was decided in the long term interests of Tata Sons and the Tata Group.”
The development took Indian industry by surprise with even senior management within the group claiming no knowledge. However over the past couple of months, there was a buzz about major changes in the leadership team, which indicated that the Tata Group could likely change some of the heads of group companies due to the poor financial performance.
On Monday, however the Tata Sons spokesperson categorically ruled out any change at the level of CEOs in the group companies.
Recently, there were disagreements within the group on the manner in which the proposed sale of the European steel business was conducted. While the sale was eventually postponed following the Brexit vote and also on assurances of a UK government support in resolving pension liabilities, some executives sajid the group suffered loss of credibility