Mistry seeks govt intervention over governance of Tata Trusts

Escalating his fight against Tatas, ousted Tata Sons Chairman Cyrus Mistry today said government has an "inherent obligation" to "remedy and repair breakdown" in the governance of Tata Trusts, the major shareholder of the group's promoter firm Tata Sons, alleging absence of appropriate structure and ethical behaviour of trustees.

Days ahead of extraordinary general meetings of six major Tata firms, including TCS and Tata Motors, which would discuss a resolution seeking Mistry's removal as director, he said the "governance of Tata Trusts has to become more accountable, transparent".

In a representation to the shareholders of six Tata Group firms, he said Tata Trusts enjoy many exemptions under law including exemptions from tax since they are solely for the benefit of the general public of India.

However, he said: "In the absence of an appropriate governance structure and ethical behaviour of trustees, it would become an inherent obligation of the government to remedy and repair breakdown in the governance of such trusts."

Seeking the government's intervention in his ongoing battle, Mistry said government must ensure the working of the Tata Trusts have a defined, transparent governance structure.

"People who have been complicit or have enabled ethical and legal transgressions or have demonstrated a blatant disregard for good governance should not be allowed continue," he added.

The governance charter across the Tata Group, including the holding and operating companies requires repair to conform to company law and global best pratices such as protection of interests of all stakeholders, including minority shareholder, Mistry said.

Stating that the governance of Tata Trusts has to become more accountable and transparent, he said: "At the heart of the sustainability of the Tata Group is governance reform, throughout the institution."

Asking the shareholders of the companies to vote against the resolution to oust him and Nusli Wadia, Mistry said: "The Tata Group is no one's personal fiefdom. It does not belong to any individual, not to the trustees of Tata Trusts, not to the Tata Sons directors, and not to the directors of the operating companies."

It belongs to all the stakeholders, including each and every shareholders, he added.

Mistry said that the very future of the Tata Group lies in how the trustees govern the Tata Trusts, since the main trust property is the holding of shares in Tata Sons.

"The conferment of all decision making power in one man or a 'high command' among them is unethical, improper and a breach of trust," he said.

It is critical that serious decisions of severe magnitude and consequence are not taken whimsically, without much thought, or for unstated collateral objectives, Mistry said in his representation.

"It is necessary to have a strong method of checks and balances in the trustees' decisions, particularly if decisions they take could indirectly give them personal benefits," Mistry said.

Making a strong plea for reform in the Tata Trusts, Mistry expressed fears of the vision of the Tata founders being "under threat" unless governance reforms are initiated.

Stating that two directors had abstained during the vote on his dismissal, Mistry underlined that those who voted him out included three nominee directors of Tata Trusts and three newly-inducted directors, who had sat only for one such meeting previously.

He further alleged that two of the three new directors were inducted on the recommendation of Ratan Tata.

"This demonstrated lack of independent judgement, and disregard of their fiduciary duty, betraying the confidence reposed in them by the stakeholders," Mistry said in the letter to the over two million minority shareholders of the conglomerate.

Mistry said there were veto rights with nominee directors of Tata Trusts on group companies, but Ratan Tata and former Tata Sons vice-chairman N A Soonawala "abused" it.

"In their capacity as trustees of Tata Trusts, they took the veto rights of the trustee-nominated directors as their entitlement to dictate to these directors how Tata Sons should conduct itself," he said.

"In the view of these trustees, the board of Tata Sons was answerable to them and through the trustee-nominated directors, they could not only call for such information but also dictate what decisions must be taken by Tata Sons," said Mistry.

The trustee-nominated directors were used "merely as an agency of indirect control by these trustees", Mistry said, listing out a slew of such instances, including the now controversial decision to re-enter the airlines business.

"Despite the issues in, and concerns surrounding Air Asia India, the Tata Sons board, at its meeting held on November 17, 2016 (which I had not attended and sought leave of absence), appears to have unanimously approved the full investment of USD 25 million, which was on hold due to the findings/recommendations of the auditors," Mistry said.

Listing out a slew of instances in the recent past, Mistry alleged that there was "collapse" of governance at Tata Sons and Tata Trusts.

These include the action against Bombay Dyeing's Nusli Wadia for speaking up against misconduct, collapse of the move to have a productivity-based wage agreement at Tata Motors, Tata Motors' independent directors being disallowed to air their views, etc.

Asserting that his association with the Tatas has been a matter of pride so far, Mistry reiterated that he took up the post of chairman of Tata Sons after being assured of a free hand by Ratan Tata.

Mistry, who has not met the media throughout his four-year tenure as the chairman, said the desire was not to "craft a personal image" for himself and his actions were driven by the desire to protect the group from threats "from without and within".

Mistry said his four-year chairmanship was "highly satisfying and rewarding", but reiterated the need to repair the "breakdowns" in governance.

"Without governance reforms, without checks and balances and without accountability for conduct of the trustees, serious value erosion for you as members of your company is inexorable. There is a crying need to reclaim the glory of the Tata Group," he said.

Pitted in a situation, where Tata Sons holds a majority, which will ensure that the resolution to remove him goes through, Mistry made an appeal to all shareholders to voice their views.

"I urge all you to think beyond the here and now. I urge you to have your voice heard loud and clear. I ask you to be a part of defining the future," Mistry concluded.