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Tatas Dump Cyrus Mistry As Chairman, Recall Ratan Tata

MUMBAI – For the past few months, TOI’s national corporate editor, Boby Kurian, had been working on a story that all was not well within the Tatas. He had heard reports of rising tension between Cyrus Mistry+ — who took over as chairman of India’s largest conglomerate in December 2012 from Ratan Tata — and the so-called ‘old guard’+ . There were many theories–ranging from unhappiness over the group’s performance, to the handling of certain situations and companies — none of which could be confirmed. At the core, though, there appeared to be a clash of cultures and management styles; there was concern over the erosion of long-held “values” and the reversal of certain policies and practices.

But the stunning suddenness with which the Tatas on Monday evening announced the replacement of Mistry, aged 48, and the temporary return of his 78-year-old predecessor to the helm has left India Inc in a state of shock.

What makes the sacking as extraordinary as it is dramatic is the fact that Mistry is not just another executive; he is son of construction tycoon Pallonji Mistry , the single largest individual shareholder in Tata Sons — the group’s holding company–with a stake of 18.5%. But an overwhelming 66% is controlled by the Tata Trusts, whose life-long chairman is Ratan Tata (remaining 15.5% of Tata Sons is held by group companies). Some years ago, the Articles of Association of Tata Sons were changed to give the trusts sweeping powers in the selection and removal of a chairman.

Conversations with people within or close to the group indicate that the decision was not as abrupt as it appears to be. Said one of them, “It seems to have happened in a hurry, but it was building up.”

Given the financial and family backing that Cyrus enjoys, any legal challenge he mounts against his dismissal could lead to uncertainty both within and outside the group, at a time when a number of its companies aren’t doing very well. A marathon meeting of the Tata Sons board was followed by a terse press release to announce that Mistry was being “replaced” by Ratan Tata as “interim chairman” and a five-member committee had been constituted to choose a successor within four months. It is said to have taken even top group executives who were physically present in Bombay House, the headquarters of the Tatas, by surprise; one CEO apparently called another and said, “Switch on your TV .”

Of the nine-member board, six are believed to have voted against Mistry while two abstained (Mistry didn’t have a vote on this). In the hours that followed, the five-member Group Executive Council that Mistry had set up was disbanded.

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