Turbulence at Tata Sons: What stakeholders are asking
Tata Sons, while not listed, sits at the apex of the largest business group in India. It enjoys a stellar reputation and is considered the epitome of all that is good and ethical. It sets the tone and tenor that all other Indian companies try follow. And it is in this context, the Tata group needs to be more forthcoming about the recent developments.

The abruptness of developments at the Tata group has left stakeholders bewildered.
In replacing Cyrus Mistry, the Tata Sons board has asserted its rights and exercised its privilege of appointing and sacking its CEO - irrespective of whether you agree with the decision or not. But, the board has failed to recognize their need to communicate. This absence of clear communication has prompted excessive speculation.
While we understand that Tata Sons Limited (Tata Sons) is an unlisted company and therefore accountable to a limited set of stakeholders, its actions affect the entire Tata group of companies - and in a sense the whole of corporate India. Given the importance of Tata Sons to the group, and the respect that the Tata name commands across a cross-section of stakeholders, it is imperative for Tata Sons to disclose more than it has.
Today the discussion (- and scrutiny) is along three arcs. The first is the legality of the process, the second the decision itself, and finally, what happens now that Cyrus Mistry has been ousted?
For investors, while the third is more fundamental, for the group the first two also matter. A procedural lapse will keep this issue festering, and if widely believed that Cyrus Mistry has been wronged, will tarnish the Tata brand. At present while it is difficult to comment on these aspects since relevant documents are not available for review, some issues that will be scrutinized will include the agenda items that were circulated, how the item to ‘sack’ Cyrus Mistry was tabled (- as Chairperson, he would have to permit it to be introduced) and whether Cyrus Mistry was given the opportunity to defend himself.
Interestingly, in going public in his self-defence Cyrus Mistry has altered the group’s equation with the eco-system within which it operates. The group should no longer expect to be revered and now must prepare for coming under far greater scrutiny of its financials and workings.
This then is the right time to ask what comes next and urge the group to provide clarity to stakeholders on questions that they are raising.
1. What are the performance metrics for the Chairperson of Tata Sons?
One of the reasons cited for Cyrus Mistry’s departure was non-performance. However, shareholders remain unclear on what were the performance metrics and the timeline to achieve those that the group has set-out. Cyrus Mistry’s attempts at reducing debt and getting rid of bleeding parts of the business appear to be rather obvious and practical decisions, given the debt overhang. This is reflected in the increased market capitalization.
If this strategic re-orientation is not acceptable to the Tata Trusts and Tata Sons, then the Tata’s must clearly articulate the deliverables of the Chairperson and the timelines within which the goals are to be achieved. This will not only help Cyrus Mistry’s successor, and prevent incidents of sudden departure in the future, but also provide guidance for investors in the listed Tata group companies.
2. What are the departures from culture and ethos of the group?
Tata Sons has stated that “the tenure of the former Chairman was marked by repeated departures from the culture and ethos of the group.” But, it is not enough to say that there were departures. Tata Sons needs to explain what these transgressions were and what are their implications, especially for the listed companies.
3. Will Cyrus Mistry continue as Chairperson in the listed Tata companies?
The Chairperson of Tata Sons is the de facto Chairperson of the major listed Tata group companies. The Tata group needs to articulate if Cyrus Mistry will continue as Chairperson of Tata Motors, Tata Steel, Indian Hotels, TCS, and other Tata companies – and if not, the market need to understand how these transitions will happen.
4. How will the dual power structure work, going forward?
Independent of whether the Tata Sons’ Articles of Association (AoA) “were modified, changing the rules of engagement between the Trusts, the Board of Tata Sons, the Chairman, and the operating companies,” with Ratan Tata remaining Chairperson of the Tata Trusts and Cyrus Mistry chairing Tata Sons, there was a dual power structure. Such duality blurs the lines of accountability and creates confusion in the rank and file.
Going forward, the group needs to communicate how it proposes to handle the disconnect between the two roles (of leading the trusts and Tata Sons). The group must put in places well-articulated roles, responsibilities, and rights, for the structure to work seamlessly.
The Tata group must recognize its engagement rules have now changed
In making an almost cursory statement that the Chairperson of Tata Sons has been ‘replaced’, and a generic response to Cyrus Mistry’s email leak, the Tata group is taking an extremely narrow and legal view of Tata Sons – as an unlisted company - with only a limited set of shareholders needing to know. But, developments including the leaked Cyrus Mistry letter, may have put events beyond their control.
How the group flies through this turbulence, will determine the way the group is perceived and its terms of engagement with its stakeholders.
Silence is no longer an option
Tata Sons has stated that it is beneath its dignity to engage in a public spat on the allegations made by Cyrus Mistry in his email. While decorum is expected, given how the dice have rolled, Tata Sons has not been left with much choice but to explain its decision to replace Cyrus Mistry. In the absence of hard facts to substantiate their action, the group risks losing public trust.
The Tata group, given its stature and its century-old presence, is responsible and accountable to a much wider set of stakeholders. It is time that the Tata group takes cognizance of this and begins to proactively communicate.
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