A year since Ratan Tata's passing, a big gap remains
mumbai/Bengaluru, Oct. 10 -- The divided trustees of Tata Trusts meet in Mumbai on Friday, a year and a day after former chairman Ratan Tata's death, in the backdrop of a void that the conglomerate still struggles to fill. The discord at the Trusts spotlights Tata's unquestioned authority during his tenure, as well as the consequences of his decision to prevent a potential centralization of powers.
Friday's meeting will be the first since the acrimony at Tata Trusts surfaced. It may also set the tone for the philanthropic entities' future, especially after the Trusts broke tradition by removing one trustee from the Tata Sons board. Details of their displeasure and the removal were first reported by Mint on 24 September.
Tata's decision to split the leadership of the Trusts and the operating company Tata Sons aimed to prevent any single person from wielding overwhelming authority. The separation of powers would also prevent the fracturing of the Tata legacy and ensure that profits from the businesses go to philanthropy, not personal luxury and spoils.
Unintentionally, the decision has sparked a tussle at the Trusts, not long after Tata's passing. At stake is the direction and decision-making at the $300 billion Tata Sons, which is trying hard to stay private, and negotiate an exit for the Shapoorji Pallonji Group, its single largest individual shareholder.
During Tata's time, the Tata Sons articles of association was amended to include the separation of its leadership from Tata Trusts. Ratan Tata, known to his colleagues as RNT, created the post of vice-chairman in the Sir Dorab Tata Trust and Sir Ratan Tata Trust, bringing in Mehli Mistry, Jehangir H.C. Jehangir, Pramit Jhaveri, and reinducting Darius Khambata. Eventually, his half-brother Noel Tata also joined the Trust.
Ratan Tata's shoes are "too big for anybody to fit," observed Thomas Mathew, author of Ratan Tata: A Life, a biography of the late industrialist. "During RNT's time, whatever he decided was final. None would question what he did because of his stature, vast experience and unflinching adherence to ethical conduct and values. Once he made a decision, it was implemented. But he would take the pains to explain to the Trustees or any stakeholder the rationale behind his decision," Mathew said. The seven trustees of Tata Trusts, which owns 65.9% in Tata Sons, are now split into two distinct groups. The first group is led by Tata Trusts chair Noel Tata. It includes two vice-chairmen: retired defence secretary Vijay Singh and TVS Motor Corp. chair emeritus Venu Srinivasan. All three served as Tata Trusts' nominee directors on the Tata Sons board, until Singh was removed on 11 September.
The second group consists of former Citibank India chief executive Pramit Jhaveri, Mumbai-based lawyer Darius Khambata, businessman Mehli Mistry, and Pune-based philanthropist and businessman Jehangir H.C. Jehangir. None of them is on the Tata Sons board. The latter group believes the three representatives on the Tata Sons board are withholding information about decisions made by the holding company.
Communication between some of the trustees has completely broken down, two executives privy to the matter said.
"Let's break this into three parts. First, what is the issue at Tata Trusts? The majority of trustees believed that Mehli Mistry should be the nominee director on the Tata Sons board. The other three disagreed. In any corporate body, the majority view has to be accepted. That is the principle of democracy. This current problem inside Tata Trusts could have been avoided if Noel and the other two directors had gone with the majority view," said senior Supreme Court lawyer H.P. Ranina.
Is there a void at the House of Tata? "I'm not sure that's a fair characterization, considering RNT was also inactive due to advancing age. But of course, because of his stature, aura and charisma, people looked up to him. And that certainly is missing now," Ranina added.
Apart from slowing decisions on actions to stay private and negotiate an exit for the SP Group, the discord at Trusts could also create delays in the appointment of independent directors to the Tata Sons board, which currently has six board members. Singh's removal and the exit of three others-Leo Puri, Ajay Piramal and Ralf Speth-left Tata Sons with six directors. These include two independent directors, Leo Puri and Ajay Piramal. A third, Ralf Speth, departed after completing his tenure.
Besides Chandrasekaran, Noel, and Srinivasan, there are three other Tata Sons directors-Group chief financial officer Saurabh Agrawal and independent directors Harish Manwani and Anita Marangoly George. Tata Sons Articles of Association states the board cannot have fewer than five directors.
For a conglomerate that spans salt to aviation and semiconductors, it needs representatives on the board of the operating entity. To achieve this, the trustees must act in unison and reach a consensus, according to the Trust's bylaws.
A former Tata Sons director said no one could have matched RNT's stature, adding that it's unfair to conclude that Noel has not been decisive in his stint as the face of the Tata Group. "Of course, this (the division in Tata Trusts) was avoidable. But all these leaders are experienced and would put the interest of the Tata Group over personal one-upmanship," he said.
Since being appointed as the chair of Tata Sons, Natarajan Chandrasekaran kept Ratan Tata abreast of all business decisions, according to an executive privy to the development. In August this year, Chandrasekaran updated the seven trustees during a 90-minute meeting. He described Tata Sons' progress in each privately-held business, including aviation (Air India), electronics and semiconductors....
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