Amidst Boardroom Manoeuvrings, A Silver Lining For The Tata Group

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Amidst Boardroom Manoeuvrings

Ever since the ouster of Cyrus Mistry as the chairman of Tata Sons on October 24, in what has been described as a boardroom coup, speculation has been rife as to who will take over the reins once Ratan Tata‘s four-month tenure is over. The 78-year old Tata scion has been serving as interim chairman and a search committee of 20 trustees has been empowered with selecting the next chairman of Tata Trusts, which has overall control of all the Tata companies and corporations.This ‘selection’ will depend on the criteria as defined in the founding documents of these Trusts. Incidentally, these Trusts were instrumental in the removal of Mistry, who blamed them for being biased towards Ratan Tata, who is the current chairman of Tata Trusts. Tata Trusts control 66% of all shares in Tata Sons, the holding company of the Tata enterprises.

The Tata scion struggles to ensure smooth sailing for the Tata Group

Amidst such boardroom manoeuvrings which might take time and possibly a legal showdown, there is some good news for the Tata Group in general. As Moody’s Investors Services, the global credit rating business of Moody’s Corporation, assuringthat the ratings of four Tata Group operating companies-Tata Motors, Tata Chemicals, Tata Steel and Tata Power- will remain unaffected despite backroom bickering, and will continue to include a one-notch uplift in ratings.Kaustubh Chaubal, Moody’s Vice President and Senior Analyst said,”We expect that Tata Sons can continue to extend support to its key operating companies, should the need arise, owing to its substantial cash holdings and the significant value of its listed equity investments, and despite an ongoing boardroom reshuffle.In Moody’s view, it is business as usual at the rated Tata companies, which are listed entities, in spite of the leadership change.” On a cautionary note, however, Chaubal also added,”Nonetheless, any change in group strategy or in the strategy of the operating companies — which in our view increases their risk appetite — could exert pressure on the Tata companies’ ratings.”

Meanwhile, the search committee has narrowed in on a few names for the top job. Among them are Ratan Tata’s half-brother Noel Naval Tata,TCS (Tata Consultancy Services) CEO N. Chandrasekaran and Ralf Speth, CEO of Jaguar Land Rover, a Tata Group company. Names like Former Unilever COO Harish Manwani are also being considered. A source aware of the committee’sproceedings stated,”The list is a small one and Noel is certainly in it. He is someone who is fully aware of the Tata ethos and value systems that have come under strain in recent times. He is also family.”

Tata Trusts are powerful philanthropic organisations, and since there are no laws currently that dictate the manner in which a chairperson of a charitable organisation must be elected, the focus is back on the 20 empowered trustees. Two main trusts, the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust, in alliance with 12 other trusts, hold power to appoint directors and veto decisions. The managing trustee is R. Venkataramanan, Ratan Tata’s former executive assistant and close confidant.

Noel Tata is 59 and younger than Ratan Tata. He is the Chairman of Trent, the Tata’s retail arm, having served as its Chief Executive Officer and Managing Director until August 12, 2010. The younger Tata is also on the board of Titan and Voltas. Since 2010, Noel Tata has served as a director and the non-executive chairman of Tata Investment Corporation (TIC). TIC is a listed investment firm with substantial stakes in other Tata Group companies

The Tata group being an Indian icon and a global giant, there will be a lot of attention on the person who will lead it in the months to come. Meanwhile, the ousted chairman, Cyrus Mistry’s complaints about the “lack of transparency”of the functioning of these trusts have been refuted by the Group’s spokesmen. MrMistry and his close sources question the governance of these Trusts and have questioned the ability of the trustees to take decisions which will inevitably impactthe $103 billion conglomerate, suggesting that the trustees are too old and not in sync with the changing global environment.

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