The most revealing sentence in N Chandrasekaran's resignation letter was not that he had decided to step down as chairman of Tata Sons.
It was his explanation of why.
After recounting that both the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust had unanimously recommended a five-year extension to his tenure, and that Tata Sons's nomination and remuneration committee had endorsed it, Chandrasekaran wrote that the proposal "was not carried through because one of the Board Members did not support it". Six months had passed since the February board meeting and a decision was not forthcoming — leaving a gap in leadership clarity, which he said was essential for employees, investors, partners, and other stakeholders.
The unnamed board member may never be identified publicly by Chandrasekaran.
Harsh Goenka, chairman of RPG group, and a keen observer of Indian businesses, said Tata Sons and its controlling trusts were not in lockstep. “In a way it's a little sad, because Mr Chandra was very able and an embodiment of the Tata values. But it is important that the Tata Trusts and Tata Sons work in unison, and that was not happening."
“Somebody had to blink, which Mr Chandra has done very gracefully,” he added.
But the fact that the resignation was as much a surprise to Tata insiders as much as the rest of the world underscored something bigger than a failed reappointment. It pointed to a breakdown in communication between the owners of India's largest business house and its most powerful professional executive.
History redux
It is a familiar story in Bombay House.
A decade ago, the relationship between Ratan Tata and Cyrus Mistry had deteriorated to the point where communication had virtually ceased before Mistry's dramatic removal as chairman in 2016. The resulting legal battle consumed years and left lasting scars on the Tata Group.
About two-and-a-half decades earlier, a younger Ratan Tata had to deal with professional satraps in the group such as Russi Mody of what is today Tata Steel and Taj Hotels's Ajit Kerkar while taking the mantle over from JRD Tata.
Today, history appears to have echoed itself, albeit under very different circumstances.
For much of Chandrasekaran's tenure there was little organised resistance to his leadership. Personally chosen by Ratan Tata after the Mistry ouster, he inherited extraordinary operational freedom. As Ratan Tata gradually withdrew from day-to-day affairs and later passed away, Chandrasekaran came to dominate the group's strategic direction with few visible checks on his authority.
That freedom allowed him to pursue some of the boldest investments in the Tata Group's recent history. Billions of dollars were committed to semiconductor manufacturing under the government's incentive programme, Tata Digital continued to absorb large amounts of capital in pursuit of an uncertain digital strategy, while Air India embarked on a turnaround that Chandrasekaran himself acknowledged could take at least a decade.
A new chair
The balance of power changed when Noel Tata became chairman of Tata Trusts. The appointment fundamentally altered the governance equation.
Tata Trusts, with its controlling 66% stake in Tata Sons, became the effective overseer of Chandrasekaran's investment decisions. Ironically, the Tata Sons chairman had earlier overseen the performance of Trent, the retail company headed by Noel Tata.
Noel inherited the responsibility of evaluating the big decisions taken for the group by Chandrasekharan. As scrutiny over the returns from businesses such as Air India and Tata Digital intensified, differences between the owners and executive leadership were increasingly difficult to paper over.
Reports spoke of differences between Tata Trusts and Tata Sons, while the resignation of Tata family member Mehli Mistry from one of the trusts, citing differences between the owners and executive leadership, added to speculation that the relationship had deteriorated. Leadership changes involving long-time Chandrasekaran associate Vijay Singh and questions surrounding the role of director Venu Srinivasan reinforced the perception that influence within the group was shifting.
Whether every reported episode reflected a coordinated power struggle is impossible to establish conclusively. But taken together they suggested an organisation where communication between ownership and management had broken down.
Difficult handovers
The Tata Group has never found succession easy.
When Ratan Tata first searched for his successor, Noel Tata, despite belonging to the Tata family, was not viewed as the natural heir. Cyrus Mistry – part of the Shapoorji Pallonji family, the largest corporate shareholder in Tata Sons – emerged an unexpected choice late in 2012.
Chandrasekaran himself was, in many ways, another unconventional selection—a successful technology executive but with no prior experience running a conglomerate with interests spanning steel, automobiles, airlines, hotels, retail, and electronics.
His resignation now leaves Tata Sons with barely six months to identify another leader for an organisation that is considerably more complex than it was in 2017. The next chairman will inherit not only Air India's long turnaround and the group's semiconductor ambitions, but also the challenge of rebuilding trust between owners and management.
The lesson extends beyond the Tata Group. Infosys experienced a similar rupture when founder N. R. Narayana Murthy and then-CEO Vishal Sikka drifted apart over the limits of founder influence. Once communication stopped, the relationship proved impossible to repair.
Corporate governance ultimately rests not on ownership structures or board resolutions but on trust between owners and professional managers. Chandrasekaran's resignation suggests that those conversations had stopped long before his letter reached the Tata Sons board.
The next chair at Tata Sons and its controlling shareholders could take a cue from the descendants of Henry Ford. Weeks before Chandrasekaran was appointed Tata Sons chair, in an interview William Clay Ford Jr, executive chairman of Ford Motor Co. offered his thoughts on avoiding leadership spats. “There is no magic formula, it is about two people. People have to work at relationships... Trust is important, communication is very important,” said Ford, who continues to chair the eponymous company. “…if there is an issue, we bring it up right away. …I spend a lot of my time on in making sure that there are no surprises.”