The Tata Group surprised everyone when on October 24, the Tata Sons board, the holding company for the conglomerate, approved a resolution to remove Cyrus Mistry as chairman of Tata Sons. There has been a war of words since between Cyrus Mistry and Tata Sons and a legal battle has ensued.
Why was Cyrus Mistry removed?
Without giving any specific reasons, Tata Sons simply said growing trust deficit and repeated departures from the culture and ethos of the Tata group was the reason behind the removal of Mistry. The board also said Ratan Tata would take over as the interim chairman of Tata Sons and a committee was formed to hunt for a new chairman in four months.
The Trusts, which are chaired by Ratan Tata and control about 66% of the shareholding of Tata Sons, were also reportedly unhappy that the performance of Tata Sons was increasingly dependent on only two companies - Tata Consultancy Services and Jguar Land Rover.
Soon after Mistry was sacked, Ratan Tata wrote a letter to group employees in a bid to end the uncertainty.
“The board has requested me to perform the role of the chairman and I have agreed to do so in the interest and reassurance of the Tata group,” he had said.
What is the role of Tata Sons?
Tata Sons is essentially the holding company of the Tata Group, which is a conglomerate of over 100 companies ranging from salt to software, automobiles and aviation with combined revenues in excess of $100 billion. Typically, the chairman of Tata Sons is also the chairman of key group companies. However, in this case, while Ratan Tata was named the interim chairman of Tata Sons, Mistry still remains the chairman of various group companies.
How powerful are the Tata Trusts?
The Tata founders bequeathed most of their personal wealth to the various trusts they created for carrying philanthropic activities. These trusts, which include Sir Dorabji Tata Trust, Sir Ratan Tata Trust and Navajbai Ratan Tata Trust, collectively control about 66% of Tata Sons, and are thus hugely powerful. Just before Mistry was appointed chairman, Tata Trusts was given special powers to nominate, approve and remove chairman of Tata Sons.
Who will be appointed as the chairman of Tata Sons?
The committee formed to find the next chairman has been given four months to come up with the future chairman. Just a day after Mistry’s sacking, TCS CEO N Chandrasekaran and JLR chief Ralph Speth were inducted on the Tata Sons board. Apart from the two, Trent MD Noel Tata, Pepsico head Indra Nooyi and former Vodafone chief Arun Sarin were some of the names that had cropped as potential candidates. Former TCS vice-chairman S Ramadorai’s resignation as the chairman of the government’s National Skills Development Agency had fuelled speculation of his probable appointment as Tata Sons chairman. Tata Sons hasn’t officially commented on the matter. However, sources at Tata group have indicated that Chandrasekaran is the top contender for the post given his strong track record at TCS.