Global proxy advisory firm Institutional Shareholders Services Inc (ISS) has recommended the minority shareholders of country's largest IT exporter, Tata Consultancy Services (TCS) to vote against the resolution seeking ouster of Cyrus Mistry as its director.
TCS will hold an extraordinary general meeting (EGM) on the request of its principal shareholder Tata Sons on December 13 to seek removal of Mistry as director.
In an advisory, the global proxy advisory firm said as neither Tata Sons nor TCS board has provided 'compelling reasons' for Mistry's removal, minority shareholders should vote against the resolution.
"The minority shareholders are more concerned about Mistry's impact at the company level rather than at the group level. TCS has outperformed its peers in terms of earnings per share (EPS) and sales over the last four years," a report in Mint said quoting the advisory firm.
It also noted that there were real issues beyond the conflict inside Tata Sons, involving the relationship between operating companies and the holding company or the alleged influence of Ratan Tata in the shadows of both.
After abrupt removal of Mistry as Tata Group chairman on October 24, 2016; there were public spats between Mistry and Ratan Tata factions. As Mistry has refused to step down as director of TCS, the EGM convened on December 13 will seek his removal.
The global proxy advisory firm has also questioned efforts to remove Nusli Wadia, who is an independent director at three Tata group companies.
"Why would a long tenured director like Wadia suddenly act 'prejudicially' or why has tenure become a problem in the last month? Why is it that operating company boards didn't seek Mistry's removal from their companies before, or raised issues to Tata Sons, if they thought Mistry was a bad influence on the board?" it asked.
Coming out in Mistry's support, the report noted support for Mistry from several independent directors at different companies seemed to indicate that Mistry was operating on the basis of a 'healthy distance from undue pressure'. On this basis, support for the proposal (removal of Mistry) is not considered warranted, it added.
The global proxy advisory firm ISS' recommendations are in contrast to that of Mumbai-based Institutional Investor Advisory Services (IiAS) which has advised shareholders to support the resolution to avoid unnecessary friction between operating companies and Tata Sons. Similarly, another advisory firm SES has also recommended voting in favour of the resolution saying TCS performance is agnostic to persons occupying post of chairmen.
