Mumbai: The Tata group on Wednesday announced the setting up of a five-member committee to decide on a “suitable successor” for Ratan Tata, the septuagenarian chairman of Tata Sons Ltd, the main holding company for India’s oldest conglomerate.
The selection committee will comprise five members, including an external member, who will eventually decide on a successor to Tata, due to retire “only” at the end of December 2012. “The committee has commenced its work,” Tata Sons said in a late evening statement.
The group declined to name the five members on the committee.
However, a senior official from Tata Sons said the committee will consist of one member each from the Sir Dorabji Tata Trust and the Ratan Tata Trust, the two charitable bodies that own a substantial stake in Tata Sons, which controls the flagship firms among the $71 billion (Rs3.28 trillion) group of 98 companies. The other two members will be enlisted from the board of Tata Sons and the fifth will be an independent director who is serving on the board of a Tata company, the official added. The official declined to give names.
The official said the recommendation of the committee on the successor will be “final” and the committee has been given a mandate to identify Ratan Tata’s successor by the middle of 2011.
He also clarified that Ratan Tata is not part of the committee. The committee was set up a “couple of months” ago, the official disclosed.
The million dollar question is whether the 142-year-old Tata group will seek someone from outside the Tata family—or outside the country—to run a business empire that has moved beyond India and developed a global footprint.
The prospect of Noel Tata, 53, as a probable candidate to replace his half-brother, the 72-year-old Ratan Tata, was not ruled out by the Tata group official, though another group official said “it is not a given”. Noel Tata is the son-in-law of Pallonji Mistry, a large shareholder in Tata Sons.
The mandatory retirement age for non-executive directors in the Tata group is 75 years, a rule introduced by Ratan Tata after he took control of the group. He turns 75 on 28 December 2012.
“The committee is in the process of formulating (the) criteria for identifying the most suitable candidate, taking into account the global nature and complexity of the group’s business at the present time,” the statement said.
According to the official, the main criteria for shortlisted candidates would be that the person should be running a major organization and should have “the vision, integrity and global exposure”.
“The group would require someone with experience and exposure to direct its growth amidst the challenges of the global economy,” the statement added.
“The selection process for a prospective candidate would consider suitable persons from within the Tata companies, other professionals in India as well as persons overseas with global experience,” it said.
The selection will be made enough in advance of Ratan Tata’s retirement to ensure a smooth transition. “The induction period for taking over the reins of Tata Sons would be at least six-eight months,” according to the release.
“I do not think this predisposes one way or the other,” said Tarun Khanna, Jorge Paulo Lemann Professor at Harvard Business School, who along with Krishna Palepu wrote a three-part case study on the Tata group. “Any serious succession plan looks both internally and externally. And this move is just a step in that direction.”
The Wednesday announcement comes amid speculation about whether Noel Tata is being groomed for the top job. Last month, he was appointed as chairman of Tata Investment Corp. Ltd. He was then appointed vice-chairman of Trent Ltd, the retail chain he helped build from scratch, and also took charge of Tata International Ltd.
Varun Sood contributed to this story.