In pursuit of stability

AuthorPublished: 28th Oct 2016  5:48 pm

In a dramatic development, Tata Sons on Monday made an announcement that its board has replaced Cyrus P Mistry as Chairman. The decision was taken at a board meeting held in Mumbai. The board named Ratan N Tata as Interim Chairman of Tata Sons and formed a selection committee to choose a new Chairman. The committee, comprising Ratan Tata, Venu Srinivasan, Amit Chandra, Ronen Sen and Lord Kumar Bhattacharyya, has been mandated to complete the process of selecting the next successor in four months. Founded by Jamsetji Tata in 1868, the Tata group is a global enterprise with over 100 independent operating companies. Tata Sons is the principal investment holding company and promoter of Tata companies. In 2015-16, the combined revenues of Tata companies stood at $103 billion. There are 29 publicly-listed Tata enterprises with a combined market capitalisation of about $116 billion as on March 31, 2016. Ratan N Tata was Chairman of Tata Sons from 1991 till his retirement on December 28, 2012. Mistry was chosen as Tata’s successor in November, 2011, and was appointed Deputy Chairman of Tata Sons, whose board he entered in 2006. He was made Chairman on the basis of his representation from Shapoorji Palonji, the largest shareholder in Tata Sons. On bourses, the Tata Group stocks dipped by up to 4.2 per cent.

However, in a confidence building move, Ratan Tata has asked Tata companies to act as leaders in their respective markets and enhance returns to shareholders. The companies must focus on their market position keeping in mind the competition, and not compare themselves with their own past. He asked the leadership of the companies to focus on their respective businesses, without being concerned about the change in leadership. Ratan Tata also said they would evaluate and continue to undertake steps that are needed. He reiterated that he had assumed the role of the Interim Chairman for stability and continuity so that there is no vacuum. The arrangement will be for a short time and a new permanent leadership will be in place soon. The board on Monday did not reveal any reasons for this leadership change but it is believed that Tata Sons was unhappy with Mistry’s approach of shedding non-profit businesses, including its steel business in Europe, and concentrating only on cash cows. And if so, the question arises whether Mistry took these decisions alone and why the board did not object. The facts will be out soon. The next four months will decide who will be chosen as the successor for this reputed conglomerate, which has always believed in leading by example.