MUMBAI: Two shareholder advisory firms are backing Tata Sons’ bid to drop ousted chairman Cyrus Mistry from the board of TCS, while a third one is opposing the resolution. TCS, in which Tata Sons holds 73%, has called for an extraordinary general meeting (EGM) on December 13 seeking Mistry’s removal as a director.
IiAS and Stakeholder Empowerment Services (SES) have recommended Mistry’s ouster as a director from TCS to avoid “unnecessary friction” between the operating company and its largest shareholder, Tata Sons. TCS’ board has already replaced Mistry with Ishaat Hussain, an old Tata hand, as chairman.
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IiAS said Mistry’s position as director of TCS was a consequence of him being chairman of Tata Sons. With his removal from that post, “his continuing on TCS’ board as a non-independent director becomes untenable”, said a note from IiAS. The Tata Group is an investor in IiAS.
J N Gupta, ex-ED of Sebi and co-founder & MD, SES, said, “A board at loggerheads with major shareholder is not in the interest of shareholders.” SES is yet to come out with a formal report as it expects Mistry to detail his defence in the next few days.
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InGovern, on the other hand, will advise institutional investors to vote against Mistry’s removal as director. “Though he has already been replaced as chairman, his continuation as non-executive director of TCS will add to the balance in the board. Mistry has a beneficial shareholding of 13.4% in TCS and would bring the perspective of any minority shareholder to the board,” Shriram Subramanian, founder and MD, InGovern Research, told TOI.
Proxy firms, however, want the Tata Group to fix the larger structural issues of governance and control of Tata Sons. IiAS said the vote must not be construed as an endorsement of Mistry’s removal as chairman of Tata Sons. “It is imperative that the Tata Group use the opportunity being provided to fix the control and governance structure — going back to status quo is not an option, and investors do not want to see a re-run,” an IiAS executive said.