Chandrasekaran is perfect for Tata cos, but he must first win back public trust

There is something of a paradox when you consider Tata Sons, the holding company of the Tata group often described in the effective but well-worn cliché as the “salt-to-software” conglomerate. The group with $120 billion in assets and $103 billion in revenues has its roots in the Parsi community and control in the hands of a few largely reclusive figures, and yet it is arguably the most respected of industry leaders in a nation of one billion people.

The holding company has its roots in the anti-colonial spirit of nationalism when Jamsetji Nusserwanji Tata founded a steel mill near the remote jungles of what is Jharkhand and yet is today an ambitious global player selling technology solutions and luxury cars.

 Chandrasekaran is perfect for Tata cos, but he must first win back public trust

N. Chandrasekaran, Chairman-designate, Tata Sons

The holding company is closely held and yet determines the fortunes not just of its nearly 700,000 employees but also of hundreds of thousands of employees and possibly millions of shareholders or mutual fund investors who directly or indirectly hold stakes in about 30 listed companies that Tata Sons has been lording over.

The naming of Natarajan Chandrasekaran as the chairman of Tata Sons would hopefully resolve some of the contradictions and provide clarity to every kind of stakeholder, because the world economy and the Indian society are not what they used to be.

As someone outside the Parsi roots of the group, the elevation of Chandrasekaran announces an unqualified meritocracy in the Tata group, where ownership and cultural values of the Parsi trusts have long been the determining factor on who runs the conglomeration. The Tata Trusts, after all, control 66 percent of shares in Tata Sons Ltd.

Tongues are bound to wag that the 53-year-old “Chandra” will sing tunes set by Ratan Tata, who exercised his authority as a leader of the Tata trusts to summarily remove Cyrus Mistry as the chairman of Tata Sons last October. But Chandra has a track record in managing Tata Consultancy Services (TCS) as a listed company in the software sector that has competitors such as Infosys and Wipro that set high standards in corporate governance.  The least he will enjoy is some start-up goodwill in boardroom discussions.

Ugly fights in courtrooms and the Company Law Board between Mistry and Ratan Tata following their fallout was a given after the controversial sacking of Mistry. So, the real game was -- and continues to be – about winning back public trust both in terms of a broader corporate image as well as shareholder support in listed companies. Here is where Chandra’s appointment might score well.

We are heading for times when both government-run financial institutions such as the Life Insurance Corporation, which hold key stakes, as well as independent directors on the boards of listed Tata companies, will be under public scrutiny. Also, shareholder advisory firms such as InGovern are also playing a key role in shaping public opinion on corporate governance. For the Tatas, all this means a new era in which their decisions will not be trusted blindly but tooth combed for propriety. Chandra may well be the most credible face under such circumstances for the Tatas to restore credibility eroded in the Ratan vs Cyrus spat.

Last but not the least, TCS, which Chandra has been running since 2009 at the very top, is a multinational whose work involves learning about various industries as part of the “domain knowledge” that is central to effectively deliver software services and solutions. As a former global head of sales at TCS, Chandra is much more than a code geek catapaulted into the corner office. He is, inside, more of a strategy man with across-the-board credibility.

As digital technologies disrupt almost every industry on the planet, Chandra’s capabilities might provide more ballast to the Tata Sons in boardroom examinations of listed companies than the questionable assignment of someone from an old-world clan, howsoever, noble their past or their intentions maybe.

For these reasons, Chandra may just be what the doctor ordered for the Bombay House. His next big task would be in facing issues raised by Mistry and shareholder value experts on how the group is run or should be. The task by no means is easy.

(The author is a senior journalist. He tweets as @madversity)

Updated Date: Jan 13, 2017 08:43:04 IST