<p>News headlined by all major media houses of the country, of a major shake-up at the top of the country’s most respected corporate giant, the House of Tatas, took the corporate world and indeed the entire country, by surprise. The Board of Directors of Tata Sons had removed Cyrus Mistry from the post of Chairman and appointed Ratan Tata as the Interim Chairman. Raman Swami reads between the lines to extract the subtext of the affair four the readers of NRI Achievers …
There had been not a whisper or any hint that such a dramatic change was in the offing, or about to take place. Nobody even had any clue that something was amiss at Bombay House, the headquarters of India’s largest business conglomerate, comprising 30 publicly-listed companies with a combined market capitalisation of US$ 130 billion, with over six lakh employees as well as a whole bevy of unlisted enterprises, charities and trusts.
So staggering was the impact of the sudden announcement, that even the best-informed business and political circles were unable to figure out why the virtual boardroom coup was carried out with such speed and urgency. Why was Cyrus Mistry, the 48-year-old who was installed in a smooth and sophisticated transition just four years ago, removed so suddenly and why was it considered necessary to bring the 78-year-old Ratan Tata out of retirement to hold the reins till another suitable successor is chosen and appointed?
Was Cyrus Mistry’s ouster triggered by his performance, competence or style of management? Were there other ethical and philosophical considerations at play, including the possibility that the Board was not comfortable with the direction in which the Tata Group was being steered under Mistry’s leadership?
Even days after the change of guard, nobody really knows for sure but tentative answers are slowly beginning to emerge. By all accounts, Mistry had been focused on making the Tata group of companies more profitable. But he was doing that by trying to revive a few loss-making enterprises and getting rid of many others that in his view were non-core businesses.
Available data shows that approximately some 57 Tata Group entities are not making profits. Another 37 companies are earning less than 10 percent return on capital. Mistry was keen on restructuring companies like Voltas and the the Tata’s Financial Service businesses. And he had drawn up a long dis-investment list. Alarm bells began ringing within the various Tata Trusts and Foundations. Selling off so many entities would have an adverse two-fold effect – one, the income of the Trusts would drastically fall; and two, the 66 percent shareholding of the Tata Trusts in the parent holding company would be significantly reduced.
Ever since Jamsetji Nusserwanji Tata kickstarted the Tata saga in 1868, the profit motive was never the whole and sole objective. Over the years, philanthropy and charity grew to become very high on the list of priorities. It is a tradition that has been proudly maintained for over 150 years and the group logo reflects it – Leadership with Trust. Under Cyrus Mistry’s new corporate strategy, philanthropy would have been in danger of being diluted in favour of the profit motive.
In 2012, when he handed over the chairmanship of Tata Sons to Cyrus Mistry, Ratan Tata had said in an interview: “The only income the Tata trusts have is the dividend they get from Tata Sons. That income has to be distributed for charity. Since I will remain chairman of the various Tata trusts, I have to protect that dividend”. And that is precisely what he has done – he has swung into action to protect the Tata trusts and to preserve the benevolent philosophy that has always been the most cherished goal of the House of Tatas.
In this crass materialistic age we live in, it might appear that old-fashioned values have no place in the cut-throat and competitive business marketplace. But the corporate history of the House of Tatas shows that the founders of the company had bequeathed most of their personal wealth to the many trusts they created for the greater good of India and its people. It is a tradition which continued till today, with the Tata Trusts controlling the bulk of the shares of Tata Sons and the vast wealth that accrues from this asset is utilized to support a truly astonishing array of causes, institutions and individuals in a wide variety of areas.
For example, not many people know that the Sir Dorabji Tata Trust, established in 1932 by the elder son of Jamsetji Tata, is one of India’s largest philanthropic foundations. The trust offers monetary assistance to students and economically disadvantaged patients, makes financial contributions to institutions and provides financial support to more than 600 non-governmental organisations (NGOs) in the country. The Sir Dorabji Tata Trust and its other allied trusts support several leading institutions of learning, research and culture in India – including the Indian Institute of Science in Bengaluru, the Tata Institute of Social Sciences in Mumbai, the Tata Memorial Centre in Mumbai, the Tata Institute of Fundamental Research in Mumbai, the Tata Medical Center in Kolkata, the National Institute of Advanced Studies in Bengaluru, and the National Centre for the Performing Arts in Mumbai.
Apart from the Sir Dorabji Trust, there are numerous other outreach arms and affiliated charitable entities, including the Sir Ratan Tata Trust. They represent a gigantic network of partner organisations active in 17 states, with its altruistic tentacles touching the lives of crores of needy and deserving citizens. Collectively, the trusts and foundations make grants to NGOs in many social development sectors, including sustainable management of natural resources and the livelihoods of the rural poor.
In addition, they are engaged in household food security and ecological security, urban poverty alleviation, informal sector livelihoods, urban planning and governance, and employability. They are actively engaged in adolescent education, child protection and women’s education, as well as creating and upgrading medical infrastructure and healthcare facilities across India, including research in alternative systems of medicine such as Ayurveda, community-based health interventions, non-communicable diseases with a focus on cancer, violence against women as a public health issue, and disability.
The Tata Trusts also extend support to Art and Culture projects in rural and urban areas, promoting arts scholarships and building archival facilities; protecting and conserving India’s cultural heritage and dying art forms; supporting research and development activities of the arts, supporting development media projects as well as developing proactive areas through folklore. In other words, over the last century and more, the Tata Trusts have been seriously engaged in meaningful philanthropy and affirmative action on a scale that even Governments are envious of.
All this was in danger of being curtailed or even terminated, if Cyrus Mistry’s profit-is-paramount priorities had been allowed to prevail. There was just too much at stake. The truth is that the concept of wealth-sharing is a mindset – some have it, others don’t. Ratan Tata evidently came to the conclusion that Cyrus Mistry had a vastly different approach to men and matters, which was incongruent and not-in-tune with true Tata values. He was already showing signs of steering the Tata ship in a direction far removed from the Tata tradition. In a word, he had to go.
Even as business, political and media circles are absorbing the impact of the shock development and seeking to gauge the likely fallout, some analysts have drawn attention to an event that took place just two days before the shake-up at Bombay House. Ratan Tata had been in Gwalior as the chief guest at the 119th foundation day function of Scindia School. In his keynote address, he made a reference to the prevailing atmosphere in the country and the challenge of overcoming problems of health and education, poverty and intolerance.
Surely, at the back of his mind, there would have been the knowledge that just two days later he would be undertaking a surgical strike to wrest back control of the House of Tatas, so that the mission to combat ignorance and disease may be once again put back on track.