6 possible reasons for Cyrus Mistry‘s ouster as Tata Sons Chairman

6 possible reasons for Cyrus Mistry‘s ouster as Tata Sons Chairman

The news came as quite a shock to the business world as Tata Sons replaced its Chairman Cyrus Mistry with Ratan Tata as interim Chairman or so it is being said. The possible reason being exposed to the media is “long-term interest” of the company. Also, it is being said that there will be no changes in the CEOs at the operating level. However, people are definitely not convinced that the board and principle shareholders could take such a drastic step without having some skeletons in the wardrobe, something that is not meant to be met with the public eyes.

Cyrus Mistry, born in Ireland, is the second person outside of the Tata family to hold the esteemed position in the Tata group. His family gave up the Indian Citizenship to take up the Irish identity since it wasn’t permitted at the time to have dual nationality. His father Shapoorji Pallonji is the largest shareholder at the Tata group.

Here are some possible reasons why Mistry could have been ousted:

1. Clash of ideas with Ratan Tata

Sources claim that there is ice between Mistry and Ratan Tata which was becoming more and more obvious with passing time. There were differences in their ethos, principles, revelation and perception of the way the company was supposed to be led. Tata Sons and Tata Trusts Chairperson at clash were seen as something that brought bad air.

2. Decisions clashed

Mistry went ahead to clear Tata Power’s $1.4-billion acquisition of Welspun’s solar farms without consulting or waiting for an approval with Tata or the main shareholders. His decision to dispose Indian Hotels Co’s overseas properties was also a major blow to Tata. Shutting down of UK steel operations was like adding fuel to fire. These were in debt but were old legacies that needed the approval of Tata. His ideas of letting go of the legacy of old guard and embracing the idea of ‘tough love’ was also not well received.

3. Docomo dispute

Mistry took it upon him to declare war on NTT Docomo to challenge international arbitration court – yet another move that garnered ill air. The Japanese telecommunication major has a 26.5% stake in Tata Teleservices that it acquired for $2.7 billion. The agreement called for Tata to find a buyer for its stake when it wanted to exit. The court claims a huge $1.12 billion in damage from Tata for which the board blames Mistry.

4. Bad performance

During Mistry’s reign it was found that the performance of the Tata was not what it was expected to be. Apart from Tata Consultancy services and UK based Jaguar Land Rover, none of its companies were doing well enough. With Tata Steel facing tough time Tata Motors also saw a huge decline in demands. Critics are of the view that Mistry was not capable of good leadership.

5. New ventures over existent business

His visions extended to building new infrastructure and collaborating new ventures like e-commerce and defense. While that was positive his ignorance on savaging the old companies that needed pruning was seen as negative impact on the expansion of the giant name garnered to fame over the years. The shareholders were agitated by his decisions that he made without consultations.

6. Dividing assets

An abrupt change was brought forth in the way the assets were divided earlier during the Tata reign. Ratan Tata was driven to expand his hands to overseas purchase like tea maker Tetley in 2000 and Jaguar Land Rover in 2008. Mistry was more towards handling the mounting debt by plotting strategies to raise cash, refinancing loans and quick selling of assets after writing them down. His selling of assets definitely did not go well with the moguls who were always in the run to buy and conquer more.

These are some possible reasons or let’s say rumors that are rife since the spokesperson for the group hasn’t given out any official statement of reason for the ousting of Cyrus Mistry. Meanwhile, there will be allegations and more appropriate reasons to come along.

Let us know in comments if we left out something that could have caused the possible clash between Tata’s own cherry-picked Mistry and the heir of the big tree.