Wadia skips Tata Steel EGM; questions sanctity of independent directors

Nusli Wadia, 72, an independent director on the board of three Tata group companies, chose not to attend the extraordinary general meeting (EGM) of Tata Steel, where a resolution seeking his removal as director was to be voted upon by shareholders.

Wadia, one-time friend of Tata Sons’ interim chairman Ratan Tata, who found himself at the receiving end of a resolution to evict him as an independent director on the boards of Tata Steel, Tata Motors and Tata Chemicals, has contested the conglomerate’s move to oust him on charges of allegedly working against the interests of the Tata group by “acting in concert” with Cyrus Mistry. The Bombay Dyeing chairman has filed a Rs3,000 crore-defamation suit against Tata Sons, and written extensively to shareholders alleging poor governance at group operating companies.

Instead of attending the Tata Steel EGM, which took place in Mumbai on Tuesday, Wadia sent a letter to the company secretary to be read to shareholders assembled at the meeting. He said that he chose not to attend the EGM since he had heard that earlier EGMs (of Tata Consultancy Services and Indian Hotels Co. Ltd) were allegedly “stage managed.”

“You may wish to seek guidance from the other independent directors at the meeting as to my performance and contribution to the company and seek their views on my independence,” Wadia said in his letter.
 
Wadia, who considers the salt-to-software group’s former chairman JRD Tata (Ratan Tata’s predecessor) as his godfather, reiterated that the kind of support that Tata Steel proposed to offer to its beleaguered European operations and employees is untenable. “The recent public statements that have been made on Tata Steel Europe just to protect 11,000 British jobs is a matter of concern that needs to be addressed by all shareholders as such support has now become unaffordable and detrimental to the interest of shareholders,” Wadia said.

The letter to Tata Steel’s shareholders also questioned the way in which an independent director of a company can be removed at the behest of promoters. “…I have tried bring to your notice that the issue before you is not about the removal of Nusli Wadia, but about the very independence of an ‘Independent Director’ and his ability to perform his fiduciary duties and responsibilities without fear or favour,” Wadia wrote. “The ability of a promoter to remove an Independent Director through the brute force of its holding in an ordinary resolution on which it can vote is a serious and major dichotomy and contradiction that needs to be and must be addressed urgently.”

Wadia added that he has provided the opinions of two jurists on this matter to the department of company affairs of the Indian government and capital markets regulator, Securities and Exchange Board of India. He said that if independent directors, who are by law supposed to chair important board committees like the audit committee and nomination and remuneration committee, which are directly accountable to shareholders, can be removed “at the whim and fancy of a promoter, then their role will be reduced to that of ‘yes men’”

Meanwhile, two other independent directors of a Tata group company, who like Wadia, had approved of Mistry’s performance as chairman have quit the company on whose board they sat. Analjit Singh, founder and chairman emeritus of the Delhi-based Max Group, and Dairus Pandole, head of JM Financial’s private equity arm – both independent directors on the board of Tata Global Beverages (TGBL)– resigned from the TGBL board on December 20 and December 21 respective.