(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
By Una Galani
HONG KONG Dec 20 (Reuters Breakingviews) - Good governance
and a strong reputation matter. That is the main message from
the Tata group's two-month battle with ousted Chairman Cyrus
Mistry. He has now resigned from the boards of various companies
within the Indian software-to-salt conglomerate, but not before
inflicting plenty of damage.
A war of words between Mistry and patriarch Ratan Tata has
illustrated the urgent need for reform, in particular at the
cosy board of the unlisted holding company, Tata Sons, and its
relationship with the philanthropic trusts that control it. In
the mudslinging, neither Mistry nor Ratan Tata have come out
Investors have voted with both their hands and their feet.
In a stinging rebuke to Ratan Tata and Tata Sons, less than
one-third of independent shareholders supported a motion last
week to remove Mistry from the board of Tata Consultancy
Services, India's biggest company by market value -
even though Tata Sons' controlling stake ensured he would have
got the axe.
The combined value of Tata's top ten listed firms, including
Tata Motors and Tata Steel, has fallen by
more than $10 billion since the saga has unfolded. Granted,
India's benchmark CNX Nifty 50 has also fallen amid a broader
cash crunch in the country. But that total is $2 billion more
than the theoretical loss if the ten firms' performance had
merely tracked the index.
In fact, strip out TCS, the IT giant whose shares were
already under pressure, and Tata group company shares have
fallen twice as much as the market. The mess is a sharp reminder
that it pays to be a well-run public company.
On Twitter twitter.com/ugalani
- Cyrus Mistry, the ousted chairman of Tata Sons, said on
Dec. 19 that he would resign from the boards of all listed Tata
companies, but he vowed to keep fighting to improve governance
within the $100 billion software-to-salt Indian conglomerate.
- In a letter to shareholders, Mistry hinted that he plans
to continue his battle against Tata Sons in court. "I think it
is time to shift gears, up the momentum, and be more incisive
about securing the best interests of the Tata Group," Mistry
wrote. "It is with this thought in mind that I have decided to
shift this campaign to a large platform and also one where the
rule of law and equity is upheld," he added.
- Mistry has waged a war of words against Tata Sons and
family patriarch Ratan Tata, who is back at the helm of the
conglomerate on an interim basis. Mistry was removed from his
role as chairman of Tata Sons on Oct. 24. Tata Sons calls
Mistry's allegations "baseless, unsubstantiated and malicious."
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(Editing by Quentin Webb and Katrina Hamlin)