* Tata Steel ousts Nusli Wadia as independent director
* Tata Motors, Tata Chemicals to vote on Wadia ouster this
By Abhirup Roy and Euan Rocha
MUMBAI, Dec 22 The bitter boardroom battle at
the heart of Tata Sons has put a spotlight on the
vulnerability of India's independent company directors who
stand-up to, or take on a dominant shareholder.
Tata Sons is not only fighting former chairman Cyrus Mistry,
who has complained of mismanagement and corporate governance
failures within the company, but is now also trying to oust
Nusli Wadia - one of the group's most fiercely vocal independent
directors - after he publicly backed Mistry.
While Mistry has resigned from all listed Tata entities,
Wadia was removed from the board of Tata Steel on
Wednesday. Tata Motors and Tata Chemicals
will vote on Wadia's ouster on Thursday and Friday.
Such corporate infighting is not rampant in India, but the
latest events could set a dangerous precedent, suggesting an
urgent need to relook at the role of independent company
directors in the country, experts say.
"What is at stake right now is not an independent director.
What is at stake is the independence of independent directors,"
said L. Iyer of LVV Iyer & Associates.
"If independent directors are under constant threat of being
removed ... why would they act in an independent manner?"
In developed markets such as the United States and the
United Kingdom, independent directors are relatively protected
as shareholdings are much more diffused. But in India, listed
firms are dominated by a major shareholder, making it easier for
the latter to stamp out dissenting independent voices.
Of the 1,594 listed and actively traded firms on India's
main bourse, some 88 percent have dominant shareholders with
30-80 percent stakes, data from Prime Database shows.
Tata Sons is the single-largest shareholder in the group
companies where Wadia is an independent director. Mistry's
Shapoorji Pallonji family owns about 18 percent of Tata Sons.
To oust Wadia, Tata Sons needs to call for a special
shareholder meeting and win a simple majority vote. The dominant
shareholder, who is calling for the ouster, is not barred from
voting on the issue.
"I think this particular case will be effectively the test
case for how robust the regime (India's company law) is or
whether any further changes need to be made to it," said
Umakanth Varottil, an associate law professor at National
University of Singapore.
India's market regulator SEBI, however, said there was no
immediate need to change the norms around independent directors.
"I, at this stage, don't foresee any particular compelling
reason to review that," Chairman UK Sinha has said.
India has only recently moved to recognise the role and the
significance of independent directors. The function was formally
introduced into the Companies Act 2013.
The law details the duties of independents - from looking
after interests of minority shareholders to scrutinising
management performance and providing objective views on strategy
decisions and other matters.
"The institution of independent directors in India is quite
nascent, so if you allow independence to be compromised at this
stage, then things can go wrong," said Iyer.
(Editing by Himani Sarkar)