Mumbai, October 24: In an extremely unexpected move, the Tata Group made a shocking announcement today. The group has decided to fire its Chairman Cyrus Mistry. Mistry, who took over as Chairman in 2011, will now be temporarily replaced by the group’s old Chairman, Ratan Tata. According to sources, a selection panel has been formed to find a successor in four months. The committee will include Ratan Tata, Ronen Sen, Venu Srinivasan, Amit Chandra. The decision to sack Cyrus Mistry came after a board meeting today.
Tata Sons, a conglomerate that is worth more than $100 billion and manufactures everything from salt to software, has not given any confirmation on the reason it chose to fire its Group Chairman. However, according to available sources, it seems as though the group didn’t find Mistry’s business model viable. The official statement from the group read,”Tata Sons today announced that its Board has replaced Mr Cyrus P Mistry as Chairman of Tata Sons. The decision was taken at a Board meeting held here today. The Board has named Mr Ratan N Tata as Interim Chairman of Tata Sons.”
The statement also elaborated, saying,”The Board in its collective wisdom and on the recommendation of the principal shareholder decided it may be appropriate to consider a change for the long term interest of Tata Sons and Tata Group. The selection committee has been constituted. The committee has been mandated to complete the process in four months. There is no change at the levels of CEOs in the operating companies.”In the past year, Tata Sons has seen a net increase in debts and a net decrease in profits. Though the reasons for his removal remain a Mistry (read: mystery), there is a real need to analyse who Cyrus Mistry is and why he has been removed as Chairman of the Tata Group. (ALSO READ: Cyrus Mistry wins the DSC Prize for South Asian Literature)
Who is Cyrus Mistry?
Cyrus Pallonji Mistry is a 48-year old Irish businessman of Indian descent. Mistry came to fame when he was appointed as the Chairman of the Tata group on 28 December 2012 after its old Chairman, Ratan Tata announced his retirement. Cyrus Mistry was the sixth chairman of the Tata group and only the second person without the Tata surname to be appointed to the post after Nowroji Saklatwala. Mistry’s grandfather runs a huge business empire of his own and owns 18.5 percent shares in the tata group. the is the single largest shareholding by one individual in the Tata group. Mistry joined the board of Shapoorji Pallonji & Co, a firm that his grandfather founded-as director in 1991. Three years later he was appointed managing director of the Shapoorji Pallonji Group.
Cyrus, who comes from a Parsi family in Mumbai, completed his schooling from Cathedral & John Connon school. This was the same school that his predecessor, Ratan Tata attended. Mistry completed his graduation from Imperial college, London and earned a B.Sc degree in Civil engineering. He then obtained a Master of Science in mManagement from London Business School. Mistry is married to Rohiqa Chagla and they have two sons together. Forbes had recently recognised him as the “richest person of Parsi descent”.
Why did earlier Chairman Ratan Tata leave and is he back for good now?
Ratan Tata retired as the Chairman of the Tata Group on December 28, 2012. The iconic corporate leader announced his retirement after a 50-year run at the helm of India’s oldest business empire. Ratan Tata was chosen as the Tata Chairman and successor by his uncle, JRD Tata, in 1991. During his decades-long run, Ratan Tata is credited with transforming the group through bold decisions including large global acquisitions, even as some of the group’s contemporaries struggled to stay relevant post economic liberalisation. Tata led the group into some notable acquisitions, starting from Tetley by Tata Tea for $450 million in 2000, to steelmaker Corus by Tata Steel in 2007 and the landmark Jaguar LandRover in 2008 for $2.3 billion by Tata Motors. (ALSO READ: Cyrus Mistry sacked by Tata Sons as chairman; Ratan Tata returns)
Now that Cyrus Mistry has been removed from his post, Ratan Tata will be returning from retirement. However, the appointment is temporary.He will be taking over as the Group Chairman. The duration of his tenure has been fixed as four months, a period during which the Tata group selection committee will find an ideal replacement to take over the key job. The selection committee will include Ratan Tata himself along with Ronen Sen, Venu Srinivasan and Amit Chandra.
Why was Cyrus Mistry selected as chairman of the TATA Group?
On 28 December 2012, when Cyrus Mistry took over as the Chairman, Ratan Tata commented on why he had been chosen as his successor and said, ” The appointment of Mr Cyrus P Mistry as Deputy Chairman of Tata Sons is a good and far-sighted choice. He has been on the board of Tata Sons since August 2006 and I have been impressed with the quality and calibre of his participation, his astute observations and his humility. He is intelligent and qualified to take on the responsibility being offered and I will be committed to working with him over the next year to give him the exposure, the involvement and the operating experience to equip him to undertake the full responsibility of the group on my retirement.”
Mistry’s previous records too had a role in his selection as the Chairman. Cyrus Mistry joined the board of his grandfather’s company, Shapoorji Pallonji & Co as director in 1991. Three years later he was appointed managing director of the Shapoorji Pallonji Group. Under him, Shapoorji Pallonji’s construction business grew from a turnover of $20 million to almost $1.5 billion.According to analysts, Cyrus Mistry played a key role and practically oversaw the diversification of Shapoorji Pallonji & Co from construction to design and building of complex projects in the marine, oil and gas and rail sectors. The group employs over 23,000 people and has a presence in India, the Middle East and Africa. Thus he has experience in construction, entertainment, power and finance.He has served on the board of Tata Sons as director for five years; was also
Cyrus Mistry then went on to serve on the board of Tata Sons as director for five years. Mistry was also a member on Tata Elxsi and Tata Power boards. He was even appointed as senior vice-president of production, DQ Entertainment. That his grandfather owned 18 percent of shares in the Tata group did not hurt his chances. As an heir of the single largest shareholder of the Tata group, Cyrus Mistry is said to have been given an unfair upper hand. (ALSO READ: Cyrus Mistry, Ramdarash Mishra among Sahitya Akademi award winners)
Why has the TATA Group fired Cyrus Mistry?
The reasons for removing Cyrus Mistry from Tata Group’s top post is unknown. A lot of conclusions, however, can be drawn from analysing Mistry’s performance during the time he held the post. For one, the turnover of the Tata group dropped to $103 billion in 2015-2016 from $108 billion in the previous year. Whereas, according to figures, the net debt rose to $24.5 billion in March 2016 from $23.4 billion a year ago.
Crus Mistry employed a “tough love” stance towards the challenges faced by the company. He got rid of non-performing assets. This was a move that was not liked by many. According to CNBC, Tata Sons decided to remove Cyrus Mistry as the chairman in the “larger interest of the group”. There are also reports that over the past 6 months, serious differences had emerged between Ratan Tata and Cyrus Mistry. According to the report, Ratan Tata will meet all Tata Group CEOs this week.
(Image Source: Economic Times)
According to numerous reports, the Tata Sons Board took the decision on “collective wisdom” to replace Cyrus Mistry. Sources claim that the principal shareholders felt it may be appropriate to change leadership. According to the Economic Times, In August 2016, when shareholders of Tata Motors complained that the dividend of 20 paisas a share was piddly, Mistry justified the move. “We have raised capital from all of you last year. We are now employing that capital in new products. I think the journey is going to be long and not for the faint hearted.” The legal battle with DoCoMo too could have been a reason for his removal. For now, tata’s Group’s drastic action to fire its Chairman remains a true Mistry (Mystery).