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Boardroom battle brings brand Tata in focus

Cyrus Mistry Exit Updated: Oct 28, 2016 08:09 IST
Highlight Story

Cyrus Mistry’s ouster and mail has already hit the Tata Group firms’ market cap but what will be the dent on brand Tata?(AP)

The boardroom battle between ousted Tata Sons chairman Cyrus Mistry and interim chairman Ratan Tata could likely dent the Tata brand, which has for long displayed attributes, including trust and reliability. The Tata brand has been at the No. 1 spot in various brand rankings over the years.

“Tata’s global brand is built on trust and reliability, and uncertainty is the enemy of both these things. Swift reassurance and a strong new leader should mean that Tata’s brand image will be undamaged, or at least suffer very little impact,” said Morgen Witzel, author of Tata: Evolution of a Corporate Brand. “But if uncertainty persists, then the brand image and its value would be at risk.”

“Tata as a brand is synonymous with trust and has gained the trust of Indians and world citizens through its 150 years of existence. Unfortunately, the sudden and unexplained removal of erstwhile chairman Cyrus Mistry is a contrast to trust,” said N Chandramouli of Trust Research Advisory. “Especially when such an action comes from a person synonymous with the brand Tata, Ratan Tata, it brings up the question ‘Why?’”.

Witzel said the abrupt removal of a chairman is not a thing to be lightly contemplated. “Something - we do not yet know what - serious must have happened to cause the board to take such an action. When a chairman is removed, the calculation any board must make is: are the short-term risks of removing the chairman greater than the long-term risks of leaving him or her in post? The short-term risks are built mainly around uncertainty. Markets don’t like uncertainty, and the abrupt departure usually causes a dip in share prices. Employees become uncertain about their jobs, management is uncertain about future strategy and investment, suppliers are uncertain about their contracts. This uncertainty can only be avoided if the company reacts quickly to allay fears.”

Some, however, think that the resilience of the Tata brand will perhaps help it bounce back.

“This is a corporate hiccup and not a corporate canker,” said Harish Bijoor of Harish Bijoor Consults. “The developments over the past few days is like washing dirty linen in public. And this is where the maturity of leadership should come in. Tatas have been known for the highest corporate governance and don’t need this negative publicity. However, the Tata equity has been built over decades of consistency, and is therefore very difficult to erode. The Tata is not just a name, but a way of life. To the extent that trust, honesty, integrity and commitment, seem to be aspects the brand resonates continuously. Give it 15 days and when the dust settles down on all of this, it will be business as usual for the Tatas.”