Cyrus Mistry ouster from Tata Sons: A controversy that was not needed
It is not doomsday, but it is a tough test for the Tata Group – maybe one of the toughest it has faced thus far.
8:45 am on a normal working day. The lobby at the iconic Bombay House. Old timers of the Tata group pay their obeisance to the bust of Jamshetji Tata to seek his blessings as they begin their day. That is the first image that stayed in my mind as I began my career in those hallowed corridors more than 15 years ago. That to many like me, is the ethos of the Tata group.
For a corporate behemoth (even by global standards) [Tata companies, taken together, generated revenues of $103.51 billion (around Rs. 677,556 crore) in 2015-16, with 67.3 percent of this coming from international businesses. Source – Tata.com] and for arguably one of the largest private sector employers in India, the ‘abrupt ouster’ of the Group Chairman – Cyrus Mistry (widely regarded as the flag-bearer of the Tata group as it marched into the new digital world) is a controversy and a boardroom battle that was not needed, especially at this inopportune hour.
The Tata Group is already engaged in critical battles on many fronts including global battles like the Docomo dispute, the fate of the Corus issue and structural headwinds to its prized IT business.
While newsrooms and the twitterati debate the reasons for this ‘abrupt ouster’- competence and performance; the indomitable Tata Group Values; a boardroom battle between two of the largest shareholders of the Group or a complicated smorgasbord of the above – the full truth may not be known in the near future.
The only certainty at this early hour seems to be that this may not be a bloodless coup. And that is sad.
Notwithstanding impending legal trials and media trials, it is the businesses and the brand that will be on the toughest trial and bear the brunt of increased public scrutiny.
It is not an exaggeration to state that there will be some discontinuity in the Group’s vision and investors, employees and stakeholders will be rattled. It is the talent at various individual businesses that will have to ensure no discontinuity in BAU (Business As Usual) and one hopes that that is where the maximum amount of energy will be spent.
The Tata Group represents 7.4 percent of the BSE’s total market capitalization [Data as on October 6th, 2016. Source: http://www.tata.com/htm/Market-capitalisation-of-Tata-companies.html] four of its group companies are a part of the Nifty, and any discontinuity in the large businesses could have a ripple effect on a host of smaller players (suppliers, vendors, distributors, etc.) that are reliant on them.
It is not doomsday, but it is a tough test for the Tata Group – maybe one of the toughest it has faced thus far. It is also a day of reckoning for Indian corporates in general as principles of (un)planned succession, corporate governance including transparency and leadership in times of crises will be rewritten.
For a Group that issued one of the first perpetual bonds in the history of corporate India, it will now become imperative to prove to its shareholders and employees and all other stakeholders that it will exist in perpetuity.
It will have to prove that the businesses that have been built over decades are indeed independent of individuals, are resilient and will flourish to see a better day.
It will have to prove that the Tata Brand and the Tata Values are invaluable assets that will weather this storm too.
(The author is an independent business and strategy consultant. She began her corporate career at the prestigious Tata Administrative Services (TAS) and can be reached at email@example.com)
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