Independent Directors Must Be Free To Exercise Their Judgement: Proxy Advisory Firm

New Delhi: Independent directors should have the freedom to exercise their judgement without any fear of retribution, proxy advisory firm IiAS said on Tuesday amid the deepening boardroom tussle between the Tatas and Cyrus Mistry.

Following the ouster of Mr Mistry as chairman of Tata Sons last month, the boardroom battle has been brewing with independent directors of some Tata group companies backing him. Mr Mistry continues to hold the chairmanship of various firms, including Tata Motors.

Apart from seeking extraordinary general meetings for removal of Mr Mistry as director from different group companies, Tata Sons has also sought ouster of Nusli Wadia as independent director.

"As a principle, such diversity of opinion should be promoted and not stifled. Healthy conflict and debate can bring in more openness in the boardrooms and prevent the risk of insularity."

"For this, independent directors must be given the freedom to exercise their own judgement without any fear of retribution," IiAS said in a report.

The proxy advisory firm also observed that as it is, independent directors have rarely been found to be independent.

"Hanging the Damocles Sword of eviction over their heads will be counter-productive. More importantly, it will be a great disservice to the minority shareholders," it added.

Mr Wadia's decision to go against the Tata group and back Mr Mistry's bid to remain chairman of Tata Chemicals had surprised the markets.

"But what is more surprising is that among all the independent directors, Tata Sons has sought the ouster of only Nusli Wadia. Singling him out adds fuel to the rumours that the differences are personality driven, rather than issue based," it noted.

Tata Sons has sought removal of Mr Wadia from the boards of Tata Chemicals, Tata Steel and Tata Motors.

An old Tata associate, Mr Wadia served as an independent director on the Tata Chemicals board since 1981, on the Tata Steel board since August 1979, and on the Tata Motors board since December 1998, the report said.