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Spat with Cyrus Mistry gets Tata global bad press, Ratan Tata blamed for ‘chaos’

As the Tata-Mistry tussle drags on, an unintended consequence for the multi-billion dollar image-conscious Tata Group has been the bad press it has received globally.
India TV Business Desk New Delhi January 01, 2017 18:16 IST
India TV Business Desk

The tussle between Tata Sons ousted chairman Cyrus Mistry and its interim chairman Ratan Tata has been dragging on for over two months. After the removal of Mistry from the post on October 24, a series of allegations and counter-allegations have been coming out in open from both sides. 

The matter has now become a legal matter as Mistry has now moved to National Company Law Tribunal against Tata Sons after he resigned from the boards of six listed Tata firms. 

As the Tata-Mistry tussle drags on, an unintended consequence for the multi-billion dollar image-conscious Tata Group has been the bad press it has received globally.

A lot of bad global press has also been aimed at group "patriarch" Ratan Tata, 78, whom the editors have blamed for the mess in the $100 billion "salt to software" conglomerate.

From a piece in The Economist headlined "Ratantrum" and a New York Times report that dwelt on some of the Tata Group's alleged murky deals, to a Financial Times columnist who said "much of the fiasco is Mr Tata's fault", a good bit of the reporting and analysis has been critical of the manner in which Tata's handpicked successor Cyrus Mistry was suddenly ousted from Tata Group - India's first true multinational.

The Economist of Britain -- where Tata is a familiar name because of its takeover of Corus Steel and Jaguar Land Rover -- bluntly said: "One of Asia's most important firms has descended into chaos. Its patriarch, Ratan Tata, is largely to blame."

Describing the Tata Group as a "rare beacon of good governance in Asia"... "until few months ago", the magazine -- which calls itself a newspaper -- said: "That reputation has now been shredded owing to a brutal fight for control between Ratan Tata... and Cyrus Mistry... The battle is bad for Tata, rotten for its outside investors... and damaging to India."

The Economist said that Mistry, who took over in 2012 when Ratan Tata stepped down after decades at the helm, has been grappling with two problems. One, that the group is "worryingly flabby" thanks to "an expansion binge at home and abroad" during Ratan Tata's reign, with "vast chunks of the group are not making enough money" -- a reference to the UK steel acquisitions and the small-car Nano. 

And two, the group's "Byzantine structure", with companies "controlled by a private holding company" which, in turn, is "controlled by murky and secretive charitable trusts set up in 1919 and 1932. Until recently they were widely viewed as benign and passive, but they now appear to be under Mr Tata's sway".

It added: "Mr Mistry may have thought he had a free hand. Far from it. Mr Tata was breathing down his neck from the start. On October 24th Mr Tata, through the trusts, orchestrated the firing of Mr Mistry from the holding company." 

It concluded that, "Not long ago he (Ratan Tata) was among the most revered figures in the past half century of Indian public life. Now he is flirting with disgrace." 

A long report in The New York Times dwelt on allegations levelled by "crusading" BJP MP Subramanian Swamy that a government report had suggested "that Mr Tata in 2008 used a front company to apply for a telecommunications license, potentially circumventing the limits on the number of licenses one investor could hold". The Tata Group has, however, said it was part of a "bona fide real estate deal" that had nothing at all to do with telecoms licensing.

The NYT report also said that Mistry's ouster was triggered in part because he had "begun reining in some favours that the company had previously extended to Mr Tata's personal friends".

A report in the Financial Times quoted Mistry's warning to shareholders that "we have witnessed an unmatched erosion of ethical values...replaced by whims, fancies and personal agenda", and blamed the "fiasco" on Ratan Tata.

"He either badly misjudged Mr Mistry in the rush to name a successor five years ago, or he could not adjust to a new Tata chairman ditching parts of his legacy. Either way, he fell into the trap he always wanted to avoid," the report said.

The Financial Times report underlined the need to professionalise the group's management, noting that it "urgently needs to outgrow its patriarch... That means a professional chairman being given real power at Tata Group".

Among other reports, The Wall Street Journal said investors have raised questions about whether independent directors at the various Tata companies are playing their proper role.

And Japan's Nikkei Asian Review pointed out that Tata group members have lost a combined $11 billion in market capitalisation since Mistry was sacked as chairman in October.

(With IANS review)