Art of boardroom coups worldwide, and why Tata Sons is no mystery
The movie Meet Joe Black provides one a classic example of a boardroom turning against a company's leadership: protagonist William Parrish—a media tycoon—is ousted by a younger CEO and the board for not divulging details of the sudden appointment of an executive assistant who chaperones the tycoon to every business meeting.
The recent events at Tata Group bring the boardroom coup back into focus. Cyrus Mistry met his end as Chairman of the powerhouse conglomerate when the Sir Ratan Tata Trust and Sir Dorabji Tata Trust, which together own 66 percent of Tata Sons, formed an alliance to oust him. The existence of this alliance is apparent because Mistry’s family-owned Shapoorji Pallonji owned 18 percent of Tata Sons and had considerable power to fight off any coup.
But a boardroom coup is not just a juicy plot twist in Hollywood movies. "This is a common way of getting rid of a powerful man," says Mohandas Pai, founder of Aarin Capital.
So, here are the top five examples in the recent past of CEOs and chairmen being hedged in and threatened with ouster when their boards turned against them.
- Sanofi: In 2014, €37-billion French drug maker Sanofi saw the ouster of boss Chris Viebacher by the board in the aftermath of his writing an open letter expressing his distrust of the chairman of the company. At the time, Chris took on the unions and the government singlehandedly, and was looking at growth with international expansion and funding R&D. He was ousted by the board within a month of writing the letter. This proved a poor end to the leadership of a Knighted man with a ‘Legion of Honour’ to his credit.
- Stada: The German pharma company recently ousted its chairman, Martin Abend, over concerns that the company was not modernising its business operations. Here, the sleight of hand of a private equity company also resulted in the entire supervisory board being replaced along with the Chairman. The €2-billion company now has a new CEO and a completely new direction. The boardroom brawl lasted for more than 12 hours, with each party trying to wrest control of the company.
- Williams Co.: This $7.5-billion oil pipeline company saw 13 directors and independent Chairman Frank MacInnis try to oust CEO Alan Armstrong recently. This was a story of a brilliant game of cards among top management. Three board members and the independent chairman wanted the company to be taken over by Energy Transfer Equity, a Fortune 500 company, and went after the deal. To their concern, Armstrong did not budge, and stalled the deal. To move the deal forward, these four members of the board attempted a coup. In this case, however, the CEO stood tall, with Armstrong ultimately getting the backing of the company. Meanwhile, the four board members, along with 13 directors, had to resign.
- Viacom: The $13.5-billion media and communications giant witnessed a falling out between two friends this year. Viacom CEO Philippe Dauman and Chairman Emeritus of Viacom Sumner Redstone were at loggerheads over a change in management. To facilitate the change, the 93-year-old chairman emeritus replaced five board members and Dauman himself. Sumner Redstone's daughter, Shari, was brought in to manage the future of the company.
- Swedbank: In a lighter boardroom conflict this year, Swedbank Chairman Anders Sundstrom of Swedbank was not reelected as Chairman for a further five year term due to a lack of sufficient support from the company. The Swedish bank with $3 billion in revenues was looking towards a new direction and, therefore, wanted a change in management style.
These five instances point to the power of the board and the need for the leader of a company to secure their support. "The boardroom is the most powerful platform that can make or break company CEOs and chairmen. Every CEO has to play it right to get the board behind him," says V Balakrishnan, co-founder of Exfinity Ventures.