Ta-Ta to Cyrus was neither as sudden nor as mysterious

MUMBAI (GNI) : The suddenness of the decision to sack the Chairman of India’s most prestigious, oldest and most ethical conglomerates – The Tata Group had sent ripples all over the world. While the world thought, it was a knee-jerk reaction and Cyrus has been happily taking shelter under the reams of newsprint making a victim out of him, the veil over the truth is being slowly lifted now.

The USD 103 billion Tata Group is known for not making even the slightest of compromises on its corporate ethics and governance standards, even if it means a loss of business opportunity. The Chairperson of such a group is bestowed with the responsibility of chartering its growth within the ethos and virtues established and practiced by the group for over a century. More than 65% equity stake of the Tata Group is held by philanthropic trusts, hence self-interests or even that of families holding significant stake comes last.

In such a group where corporate governance and ethos are sacrosanct, acts of self-interest are annulled; appropriately and immediately. However, when there is extensive evidence that suggests the Chairman of the group indulging in such an act, the situation gets murkier and difficult. From the date of Cyrus assuming office to August 2014, contracts amounting to Rs 1,600 crore were awarded to Shapoorji Pallonji& Company Ltd., a family firm wherein the then Chairman Cyrus Mistry is reported to have owned a substantial stake. Most of these contracts were for engineering, construction, civil and interior works carried out at various locations across different cities.

Nearly Rs. 960 crore worth of contracts have been awarded to the Shapoorji Pallonji& Company Ltd. between December 2012 and the date when Mistry was asked to report these and refrain from any contracts that led to a “conflict of interest” and compromised the Tata Group ethics. The contracts awarded have been spread across various entities of the group. A contract of around Rs. 100 crore has gone through one company for which the work ranged from civil and structural erections to emergency repairs. There are other smaller group companies of the Tata group that have also reported to have given out contracts to Shapoorji Pallonji& Company Ltd during the period.

 

However, the Tata group has a responsible board with professionals of stellar and impeccable repute and ouster of a Chairman is not an everyday decision that can be taken without the consent of the board. In spite of repeated intimations by the Chairman Emeritus Ratan Tata to refrain from issuing contracts to family companies, Cyrus had tried hard to convince him by citing international norms for safeguarding interests in similar “conflict of interest” situations. He said that there are “prescribed legal and best practices to handle these and stated that he is not able to “agree with the rationale“ for Tata’s directive for a complete ban.

However, Ratan Tata decided to protect the ethos that built the very foundations of this conglomerate. The board, comprising professionals of the highest order and integrity, concurred with Ratan Tata. And the rest, as they say is history, but it is, now,not a mystery anymore.