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Why Tata Group replaced Chairman Cyrus Mistry with his predecessor Ratan Tata?

Cyrus Mistry is the second chairman who was appointed from outside the family circle

October 26, 2016: One of the most respected business brands of India, Tata Sons, the holding company of the Tata Group, unexpectedly took a sudden move on Monday by replacing Chairman Cyrus Mistry with Ratan Tata, his predecessor. Cyrus Mistry is the second chairman who was appointed from outside the family circle. He was chosen as a successor to Ratan Tata and was appointed in 2012 with high hopes to steer the company. His removal in less than four years came as a shock to the business world.

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Adding to that, there is no proper clarity as to why the decision was taken. So, the first question on everyone’s mind was, WHY?
Here are some of the theories according to the analysis of country’s major dailies:

Performance Issues

The Economic Times mentions about Ratan Tata being allegedly unhappy with Mistry’s “approach of shedding non-profit businesses, including the conglomerate’s steel business in Europe, and concentrating only on cash cows.”

It also mentions about the “fundamental disconnect between Mistry and Tata, particularly with regard to ethos, values, vision and the direction that the group was headed in. Detailed letters were sent to Mistry asking him to spell out his vision, five-year plan, etc, but the responses were vague and non-specific.”

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Contrasting Styles in Investment

Mint also writes about “contrasting styles in investment” stating the sharp contrast in the approach of Mistry and Tata. It notes, “The approach of Mistry, 48, was in sharp contrast with that of his predecessor Ratan Tata, 78, under whom the group was one of India’s most aggressive acquirers, especially of overseas assets.”
It also added, “Tata group shares may pay a price for the abrupt, opaque decision.”

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Conflict

The Business Standard speaks of the conflict that was building up and the people known were quite aware of it. It also cites the instances where Ratan Tata felt he was not informed properly about the business decisions taken by Mistry.

That being said, if Mistry takes a legal action against his sacking that could hamper Tata as he is the son of the sole largest individual shareholder in Tata Sons.

– by Pinaz Kazi of NewsGram. Twitter: @PinazKazi

 

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