A year since Ratan Tata passed, the void at the conglomerate is too big to miss

Friday’s meeting will be the first since the acrimony at Tata Trusts emerged. This could also set the tone for the future of philanthropic organisations, especially after the Trusts broke with tradition by removing a trustee from the board of Tata Sons. Details of their displeasure and removal were first reported by: Mint On September 24.

Tata’s decision to split the leadership of the Trusts and operating company Tata Sons was aimed at preventing a single person from wielding overwhelming power. Separation of powers would also prevent the Tata legacy from disintegrating and ensure that profits from businesses go to philanthropy and not personal luxuries and spoils.

The decision inadvertently sparked a row between the Trusts shortly after Tata’s death. At stake is the management and decision-making of the $300 billion Tata Sons, which is trying to remain private and negotiate the exit of its largest individual shareholder, the Shapoorji Pallonji Group.

During Tata’s term, Tata Sons’ articles of association were amended to include the separation of leadership from Tata Trusts. Ratan Tata, known as RNT to his colleagues, created the post of vice chairman in Sir Dorab Tata Trust and Sir Ratan Tata Trust by bringing in Mehli Mistry, Jehangir HC Jehangir, Pramit Jhaveri and reinstating Darius Khambata. Eventually, his half-brother Noel Tata also joined the Foundation.

big shoes

Thomas Mathew, author of Ratan Tata: A Life, a biography of Ratan Tata, observed that Ratan Tata’s shoes were “too big for anyone to fit in”. “In RNT’s time, everything he decided was final. Because of his stature, vast experience and unwavering commitment to ethical behavior and values, no one would question what he was doing. Once he made a decision, it was implemented. But he would make an effort to explain to the Board of Trustees or any stakeholder the rationale behind his decision,” said Mathew.

The seven trustees of Tata Trusts, which owns 65.9% of Tata Sons, are now divided into two different groups. The first group is led by Tata Trusts chairman Noel Tata. It has two vice-chairmen: retired defense minister Vijay Singh and TVS Motor Corp. Chairman emeritus Venu Srinivasan. All three served as nominee directors of Tata Trusts on the board of Tata Sons until Singh was ousted on September 11.

The second group consists of former Citibank India CEO Pramit Jhaveri, Mumbai-based lawyer Darius Khambata, businessman Mehli Mistry and Pune-based philanthropist and businessman Jehangir HC Jehangir. None of them are on the board of Tata Sons. The second group believes that three representatives on the Tata Sons board withheld information about the decisions taken by the holding company.

Two administrators involved in the matter said communication between some trustees had completely broken down.

Problem

“Let’s break this into three parts. First, what is the problem in Tata Trusts? The majority of the trustees believed that Mehli Mistry should have been a director-designate on the Tata Sons board. The other three disagreed. In any corporate structure, the majority opinion must be accepted. This is the principle of democracy. If Noel and the other two directors had acted with the majority opinion, the current problem within the Tata Trusts could have been avoided.” said senior Supreme Court lawyer H P Ranina.

Is there a vacuum in the Tata Dynasty? “I’m not sure that’s a fair characterization, considering RNT is also inactive due to his advancing age. But of course, people respected him because of his height, aura and charisma. And that’s definitely missing now,” Ranina added.

Apart from slowing down decisions on staying private and negotiating an exit from SP Group, the dispute in the Trusts could also lead to delays in the appointment of independent directors to the Tata Sons board, which currently has six board members.

With Singh’s sacking and the departure of three others (Leo Puri, Ajay Piramal and Ralf Speth), Tata Sons is left with six directors. These include two independent directors, Leo Puri and Ajay Piramal. The third, Ralf Speth, left after completing his term.

Besides Chandrasekaran, Noel and Srinivasan, there are three other Tata Sons executives: Group CFO Saurabh Agrawal and independent directors Harish Manwani and Anita Marangoly George. Tata Sons Articles of Association state that the board cannot have less than five directors.

Departments

For a conglomerate whose reach extends into aerospace and semiconductors, it needs representatives on the operating entity’s board of directors. To achieve this, the board of trustees must act together and reach consensus in accordance with the Foundation’s charter.

A former Tata Sons executive said no one could live up to RNT’s stature, adding that it was unfair to conclude that Noel was not steadfast in his duty as the face of the Tata Group. “Of course, this (split in Tata Trusts) could have been avoided. But all these leaders are experienced and will put the interests of the Tata Group ahead of personal superiority,” he said.

According to executive knowledge of the development, Natarajan Chandrasekaran has kept Ratan Tata informed of all his business decisions since his appointment as chairman of Tata Sons. In August this year, Chandrasekaran updated seven trustees during a 90-minute meeting. He described Tata Sons’ progress in privately owned businesses, including aviation (Air India), electronics and semiconductors (Tata Electronics) and e-commerce (Tata Digital). After the meeting, four directors of Tata Trusts who were not candidates congratulated Chandrasekaran and wished him success.

The eight leaders then went to the Taj Mahal hotel for dinner.

This was a break with the past. Previously the key man of the Trusts was only one person: the RNT. As chairman of the trusts, his approval was sought before every major decision affecting the Tata group.

“It is a good practice for Tata Sons chairman Chandrasekaran to brief the entire board of trustees. I would say that the earlier practice of only updating Ratan Tata was not a good corporate practice,” Ranina admitted.

According to the board of trustees, no negative effects are expected at the meeting, which will be held in a positive atmosphere. For now, a few executives believe rapprochement can be achieved.