It’s been a long time since I have written on this blog, but the recent developments in the Tata Sons board room have made me come out of my hibernation. Cyrus Mistry, the first non-Tata chairman of the Tata group, was relieved from his position as the chairman of the group. Ratan Tata, the Ex-Chairman of the group, will take over as the interim chair of the group. Going by the recent newspaper reports, the move was somewhat unexpected, and the exact reasons aren’t clear yet. It would be interesting to follow how different shareholders of the company will react to this new development. Pallonji Mistry, the father of Cyrus Mistry, is the largest individual shareholder in the company. However, Tata trusts still have the majority.
As this article points out
“There is one positive in the ongoing Tata imbroglio. Indian boards are usually very timid when it comes to taking on powerful chairmen. Tata Sons is a private company with a very complex holding structure, and with likely undercurrents of family tension, but the readiness of a powerful board to replace its chairman should not be ignored. We wish there are more such instances of tough board action in listed companies.“
There is no doubt that this is will go down as an important event in the Indian corporate history. However, I also hope this event to turn out to be an inflection point in the Indian corporate governance history. Only future will tell if this event will turn out to be a trigger for increased assertiveness of Indian boards with powerful CEOs/promoters.