The board has constituted a committee to choose the new chairman. Apart from Ratan Tata himself, the committee comprises TVS Chairman Venu Srinivasan, Bain Capital’s Amit Chandra, former diplomat Ronen Sen and Kumar Bhattacharyya of Warwick University. All of them, except Bhattacharyya, are on the board of Tata Sons.
The committee has been mandated to complete the process in four months. “The selection of the new chairman will be from across the world and all suitable candidates will be considered,” said a top source in Tata Sons.
The CEOs at the operating company level of the group have not been touched.
Tata Trusts, chaired by Tata, owns 66 per cent stake in Tata Sons, while the Mistry family owns 18.5 per cent stake. The rest of the shares are owned by Tata group companies
and private investors.
Sources said a legal battle was brewing with the Tatas hiring Abhishek Manu Singhvi and Harish Salve and Mistry exploring legal options. Sources in Pallonji Mistry group said it was a personal matter between the two, and added, “It is a time to show maturity and calmness.”
The youngest son of construction magnate Pallonji Mistry, Cyrus Mistry took over as the chairman of Tata Sons in 2012, replacing Tata, who stepped down after 21 years at the helm.
Mistry will remain a director on the board of Tata Sons till March 2017, a position he held before he became chairman. But he will have to quit as chairman of all group companies.
In late evening statements to the stock exchanges, Tata Power and Tata Motors said their boards met on Monday and have replaced Mistry as chairman with Tata as interim chairman till a suitable replacement is found.
A top source in Tata Sons said the group was not doing well under Mistry and the board was unhappy with the performance, especially in Europe and India. “Look at the poor returns on investments across all businesses in India and abroad,” the source said, adding the Tatas were not happy with the advisors around Mistry.
With a new chairman at the helm, many top managers hired by Mistry are likely to be changed, the source said, adding Tata Sons was unhappy with Mistry's approach of shedding non-profit businesses, including the conglomerate's steel business in Europe, and concentrating only on cash cows.
The Tata group is also engaged in a legal battle with Japan's Docomo over the splitting of their telecom joint venture Tata Docomo.
In April 2013, Sir Sorabji Tata and Sir Ratan Tata Trust, the two Tata trusts chaired by Ratan Tata, had got sweeping powers in the constitution of selection committees to appoint Tata Sons' future chairmen. They also acquired power to appoint or remove a chairman with their own three-member quorum of the selection panel.
Under the changed articles of association, three of the five members of the selection committee will be nominated by the trusts, while Tata Sons was to appoint one member and the fifth will be an independent person. The trusts will select the committee's chairman from among the members nominated by them.
Earlier, this was done by the entire five-member panel.
The new articles of association had said the quorum for a meeting of the selection committee, if necessary, will be the majority of the members nominated jointly by the trusts. The same process will be followed for the removal of a chairman.
Mistry was chosen as Tata's successor in November, 2011, and was appointed deputy chairman of Tata Sons, whose board he had entered in 2006. He was made chairman on the basis of his representation from Shapoorji Palonji, the largest shareholder in Tata Sons.