Home/ Opinion / Uneasy lies the Tata crown

Those who have known Ratan Tata well over the years vouch for his sense of fair play, his innate courtesy and his infectious smile. What they also tell you is that he conceals an iron fist in a velvet glove. When it comes to business or matters related to his business interests, this is a man who believes not in win-win but win-lose—I win and you lose. He may be 78 years old and for the last four years he seems to have been content playing the benevolent angel to a clutch of technology start-ups. But if you thought he had taken his eyes off the ball, the tough words in his signed statement as the new interim chairman of Tata Sons Ltd, following the abrupt and shocking replacement of Cyrus Mistry, should put such thoughts to rest. “I have agreed to do so in the interest of stability and reassurance to the Tata group." That’s not a man looking to appease anyone, not even someone he helped appoint as his successor less than four years ago.

Not surprisingly, Mistry, a proven success in his own businesses and on the board of Tata Sons since 2006, differed and departed from what Ratan Tata had set in play over the two decades that he led the group. The disconnect though, seemed normal and related to business strategy.

Tata Steel’s global operations were the personal handiwork of Ratan Tata, something he had staked his group’s future on in 2007 when he paid $12 billion to buy UK steel maker Corus Group Plc. The move catapulted Tata into the list of the world’s top steel makers but also laid the seeds for the massive losses that Mistry inherited when he took over as chairman, coincidentally around the time that the commodities cycle was turning adverse. Mistry’s calculated decision to exit the business may have seemed rational to him but for the ex-chairman it must have been a bitter pill to swallow.

The roles seemed reversed when it came to aviation, which was clearly a passion for Tata. Mistry may or may not have been too excited about the venture into this already crowded area but certainly the splitting of the investments into Air Asia India and Vistara seemed at odds with his style of working.

Yet, these were business decisions and in a group as professional as the Tatas, must have had the collective assent of the board members, which included Ratan Tata. Nor is the latter a stranger to a new chairman stamping his authority in a new position. One of his first moves on taking over as group chairman in 1991 was to tighten his control over the various group companies. Thus, powerful satraps like Russi Mody at Tata Steel Ltd and Darbari Seth at Tata Chemicals Ltd, who under his predecessor J.R.D. Tata had pretty much the run of the place, were reined in and then eased out. This was followed by a massive restructuring exercise to create a more streamlined and capital-efficient group.

ALSO READ | Cyrus Mistry ousted as Tata Sons chairman, Ratan Tata steps in

So were there other reasons for this abrupt decision? A clash of wills at this level seems churlish. That Mistry wasn’t even given the option of resigning points to unprecedented and unusual circumstances and holds out the promise of more developments. In its 148-year history, the group has experimented with different chairmen for Tata Sons and Tata Trusts only once before—when J.R.D. Tata headed the trusts and Ratan Tata headed Tata Sons. But that was for a only short time before JRD’s death and, in any case, involved two Tatas. The failure of the move to appoint an outsider to head Tata Sons while Ratan Tata retained his hold over the trusts could also mean that the next chairman may well be from the larger Tata family. But will Mistry, whose family owns just over 18% of Tata Sons, take the insult lying down?

Sundeep Khanna is a consulting editor at Mint and oversees the newsroom’s corporate coverage. The Corporate Outsider will look at current issues and trends in the corporate sector every week. To read more from The Corporate Outsider, click here

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Updated: 25 Oct 2016, 02:48 AM IST
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