Tremors deepening fissures within Tata group boardrooms and its broader corporate ecosystem should be viewed in the light of a striking data-point: apparently only 3% of family businesses survive beyond the fourth generation.
The Tata group, among India’s oldest conglomerates, has reached an inflection point and all engaged parties within the Tata orbit must decide where they want the group to be: the 3% club or the mortal 97% league. Crucially, outlining a succession plan will actually determine the Tata Group’s future.
Rumblings in the group’s governance structure came to a head after the surprise resignation letter last week from N. Chandrasekaran, chairman of the Tata Group’s holding company Tata Sons.
The episode has exposed gaps in the storied group’s governance standards. Chandrasekaran has indicated his desire not to seek a third term; he will effectively step down when his tenure ends in February 2027. He has also indicated that his decision may have been influenced by a single board member’s reluctance to approve his third innings. No names were mentioned.
There are, however, no prizes for guessing who that is. Noel Tata, director of Tata Sons and chairman of Tata Trusts, controls the majority voting power on the Tata Sons board and past reports have indicated how he has been engaging with Chandrasekaran over mounting losses at Tata Digital and Air India, among others.
There is another oddity about Chandrasekaran’s resignation: he is leaving without having identified a successor. At least in the public domain. A decade spent in the corner office of a large conglomerate should have afforded him time and opportunity to identify and groom a likely successor or construct a short-list of successors for Tata Sons’ board members to finalize.
There are two possible reasons for this apparent professional lapse: he either thought he would accomplish this particular task in his third term or, more importantly, he probably felt he did not have enough skin in this particular game.
The Tata Group, all said and done, is still a family-run conglomerate. The holding firm’s current chairman Chandrasekaran might be a career professional, but he served, truth be told, at the pleasure of Ratan Tata, former chairman of Tata Sons and Tata Trusts.
Ratan Tata exercised absolute control over both entities, including providing directions to the Tata Sons board even after he had retired from it; this was evident in how Cyrus Mistry was ousted and replaced with Chandrasekaran, even though the final acts were executed by his appointed nominees.
His demise in October 2024 without outlining a viable succession plan has left a governance void and resulted in all-too public chaos.
Most smooth succession plans in family-run businesses occur during the patriarch’s lifetime. J.R.D. Tata retired as Tata Sons chairman and anointed Ratan Tata as his successor in March 1991, a good two years before his death in Geneva.
JRD’s contemporary Ghanshyam Das Birla also finalized a detailed succession plan for the sprawling Birla Group after his heart attack in 1977; the group had direct control of around 200 companies and indirect control over 70 companies then. Also, five years before his demise in London in 1983, he had relinquished control as chairman of flagship Grasim Ltd in favour of his grandson Aditya Vikram.
Reliance group founder Dhirubhai Ambani’s death in 2002 sparked a headline-grabbing sibling row over succession, raising questions over why the patriarch had not left behind a will indicating a succession plan.
The reality is that most succession plans in family-run businesses do not go through the testamentary route. One of the reasons is that a will needs a court probate before it can be executed and is, thus, open to challenge from disgruntled family members.
The most recent case involves late Sona Comstar chairman Sanjay Kapur, whose putative will is under a three-way dispute, involving his mother, first wife and second wife and their children.
The lack of an identifiable successor in the Tata Group has created a vacuum into which interlopers have jumped, disrupting the group’s smooth functioning to further their personal ambitions. Their avowed purpose might be preserving Ratan Tata’s corporate philosophy. It is well known that Ratan Tata had differences with Noel Tata, his half-brother.
There are also concerns whether Noel Tata is up to the task. But there were similar questions about Ratan Tata in 1991, who had managed only Nelco and Tata Industries till then. Ratan Tata subsequently grew into the job and earned universal respect.
So here is the immutable truth: Noel Tata is now the inheritor of the famous family name and has both the community’s support and legal rights, as Tata Trusts chairman, to decide the Tata Group’s future. He and the selection committee should have the freedom to appoint a new Tata Sons chairman, which may well be another career professional for now. Good governance requires everybody to respect that.
The author is a senior journalist and author of ‘Slip, Stitch and Stumble: The Untold Story of India’s Financial Sector Reforms’ @rajrishisinghal