Tata Sons to Samajwadi Sons: Politics and perils of succession plans

The similarities are riveting.

Uttar Pradesh is India’s largest state spread across 2.4 lakh km inhabited by of 217 million people, with 80 Lok Sabha seats and 403 assembly seats. The House of Tatas is India’s largest conglomerate with over 100 companies spread across six continents with 6.6 lakh employees, annual revenues of Rs 6.65 lakh crore and market capitalization of over Rs 8.36 lakh crore.

The House of Tatas and the Samajwadi Party, rather serendipitously, witnessed a regime change where the baton was handed over to the next generation around the same time. Akhilesh Yadav, scion of the Yadav parivar became the youngest chief minister at the age of 39 in March 2012. In December 2012, Cyrus Pallonji Mistry, scion of the Shapoorji Pallonji family, then 44 years old, was appointed Chairman of the Tata Group. Doubtless both Cyrus and Akhilesh were stepping into large shoes.

Cyrus was replacing Ratan N Tata, a veteran of many battles who transformed the group between 1991 and 2012 from fiefdoms of satraps to a salt-to-software conglomerate with a global footprint. Akhilesh was taking the reins over from Mulayam Singh Yadav, three-time chief minister, a die-hard socialist with a heightened knowledge of political meteorology and opportunity.

Ratan Tata, anointed by the legend JRD Tata, had waged boardroom battles to oust the likes of Russi Mody of the 16-egg-omlette fame, the redoubtable Darbari Seth, the wily Ajit Kerkar on his way to supremacy. When he took over in 1991, Bombay House was known as the Viceroy’s Office and the companies were princely states – the group’s turnover was barely Rs 10,600 crore. Mulayam Singh Yadav, a wrestler of repute, deployed every hold and hook, to fight and consolidate his base migrating from mentor V P Singh’s Janata Dal through four different arrangements to ultimately set up the Samajwadi Party.

Ratan Tata and Cyrus Mistry. Reuters

Ratan Tata and Cyrus Mistry. Reuters

On Monday, both the House of Tatas and the House of Samajwadis were in turmoil. There was the battle within a family enterprise and there was the boardroom knockout in the enterprise owned by trusts-of-families. The fracas in Bombay House was a private affair followed by public uproar. The brawl in Lucknow was a very public uproar followed by attempts of a private in-camera compromise. Cyrus Mistry was summarily sacked while Akhilesh Yadav has been summarily discounted.

The old guard has returned to roost – Ratan Tata was back at the helm while Mulayam Singh Yadav manoeuvered himself to regain control. At the House of Tatas, which bears the motto ‘Leadership by Trust’, succession was wrecked by distrust. In the Samajwadi Party the familial quarrels derailed the installation of Akhilesh. Pride and prejudice came together. The bottom line is that the succession plans have come unstuck – one has been declared as failed and the other is flailing. If one was a controlled implosion the other promises to take the path of Madame Pompadour who famously said “apres moi deluge (after me, the flood)”. Both Cyrus (the name with Greek etymology means far-sighted) and Akhilesh (roughly means Lord of the Universe) have been left questioning themselves and their one-time-mentors.

Mind you, both were voted in with confidence. Ratan Tata said in November 2011: "The appointment of Mr Cyrus P Mistry as Deputy Chairman of Tata Sons is a good and far-sighted choice. He has been on the board of Tata Sons since August 2006 and I have been impressed with the quality and calibre of his participation, his astute observations and his humility. He is intelligent and qualified to take on the responsibility being offered and I will be committed to working with him over the next year to give him the exposure, the involvement and the operating experience to equip him to undertake the full responsibility of the group on my retirement."

Mulayam Singh Yadav exuded confidence and advised his son, “You all have a responsibility on your shoulders. You should try to fulfil aspirations of the people and win their hearts with your behaviour.” He then advised him to keep “his personal and social life clean. This will be fulfilment of my dreams.”

Curiously neither the followers of the Samajwadi Party nor the shareholders of the Tata companies quite know – or at least have not been told – what caused the upheaval. Such is the systemic opacity in the domain of political parties and in corporate boardrooms that the cause of the consequences has been parked in a black box. While there is some airing of grievances against Akhilesh that suggest reasons, the story of why Cyrus was sacked has been left to the fertile imagination of sources. Typically in India post any conflict the decibel rights are largely with the victor while the vanquished sulks in victimhood.

The air is thick with speculation and the social media abuzz with the high-cholesterol platters of conspiracy. Akhilesh has been blamed for not abiding by the will of the party and the cadre – at the core, typically of Indian politics, is the appointments industry. The ouster of Cyrus Mistry similarly is enveloped in allusions and allegations – of debatable acquisitions and divestments of loss-making parts of the group – that raise questions about levels of due diligence and corporate governance at Tatas. If the ouster of Cyrus is blamed on the many satraps the emaciation of Akhilesh is blamed on the “uncle virus”.

For sure, these issues populate the landscape of conflict. There is the issue of governance in Uttar Pradesh and performance of the Tata Group. The crux of the problem though is the indefinable issue of personalities and matrix of control. In the case of Akhilesh the assorted uncles and as Mulayam said "sycophants" and in the case of Cyrus his team aka the group executive council which was ousted with him and the entrenched interests of old guard across the group.

UP Chief Minister Akhilesh Yadav and SP chief Mulayam Singh Yadav. AFP

UP Chief Minister Akhilesh Yadav and SP chief Mulayam Singh Yadav. AFP

Interestingly, both Akhilesh and Cyrus were felled by the operating system of power. The challenge was similar. Both Akhilesh and Cyrus enjoyed executive power but were challenged by the structure of controls. Regardless of the contribution of Akhilesh for the 2012 victory and his anointment, the button for the not-so-nuclear family rested with Mulayam Singh Yadav. At Bombay House, Cyrus Mistry had executive authority but only the penultimate word – the last word rested with Ratan Tata who represented the trusts with an iron-clad controlling interest of 66 percent in the group.

Leadership is an individual style and is about the individual but conflicts are not just about the individual. A major factor is the court and company of the individual. Quite obviously Mulayam Singh Yadav and Ratan Tata harboured apprehensions. It is quite possible that they perceived a threat to the value propositions they had nurtured over decades. It is also possible that both Cyrus and Akhilesh did not quite live up to expectations or strayed from the shared vision of the future. Corporates and political parties survive and thrive on the simple principle of market share – of votes and value. And the imperative of survival superseded previous covenants.

India’s political and corporate world is yet to come to terms with the need for and the necessity to evolve the mechanics of succession planning. In the political domain there are the examples of the Congress which split post the challenge by the syndicate, the ugly spat that followed the demise of MGR in ADMK, the splintering of the Republican Party of India, the split in the Shiv Sena represent absence of a succession plan. What is also true is that those running one-person-parties – and these parties currently account for over 90 seats in the Lok Sabha – seem to be disengaged from the idea of the crucial question - “what if”!

The same is true in the corporate world where bloodline battles have been all too common – the landscape is littered with poorly planned succession and resultant feuds. The average life span of companies on the US S&P index has plummeted from 50 years to 15 years in the last five decades. It has been no different in India. The listing history of the Bombay Stock Exchange’s Sensex reflects the destruction of ideas and value – by the winds of change and by resistance to change. The exceptions to the law of decimation are in the east, mostly in Japan. Their secret: a shared vision of what constitutes value and what the future could be.

The issue is not really about this political party or that corporate house. The issue is legitimately about the preservation of value. There is no running away from the old maxim that power is the most persuasive rhetoric. There is also no escaping that prestige is the shadow of money and power and is difficult to surrender. So there will be ego-centric battles, there will always be differing views or views that differ from ones previously harboured. The challenge, for corporates and political parties, is and will always be aligning ownership of the enterprise with management.

Politics they say is the art of the possible and how to manage the past to a shared future is eventually the art of management.

The author is a political-economy analyst and the author of Accidental India: A History of the Nation’s Passage through Crisis and Change. He tweets @ShankkarAiyar

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Updated Date: Oct 26, 2016 12:21:38 IST

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