More than a succession

Tata is separating management from shareholding control

Six things can be said safely about the Tata succession. First, it took the search committee 18 meetings to find a suitable candidate, so there was no obvious choice. Second, Cyrus P Mistry is a relatively unknown commodity, but people who know him speak well of him. Third, someone familiar with the manifestly unique group’s working would be the better choice, all other things being equal; and though Mr Mistry has not run any Tata company, he has been on the group’s apex board for five years and before that he was a director at Tata Power for about a decade. Fourth, to the extent that the track record of the Shapoorji Pallonji group is a guide, the group has had good leadership over the past decade, and Mr Mistry has been one of its two managing directors.

Fifth, no one can be really prepared for being catapulted into the corner office at a vast and complex conglomerate, rich with its history and cultural moorings, nor does anyone really know how a choice will work out. After all, no one predicted 18 years ago what Ratan Tata would eventually do on his watch. The naysayers had their say in 1993, but they have been proved wrong. So it would be wise at this stage to note that Mr Mistry holds promise, wish him well and watch what he does, rather than pass instant judgement. Finally, Ratan Tata and his board deserve to be complimented on a process-driven exercise that may well have been influenced (as most such exercises are) by personal likes and dislikes, but which at the end has produced a suitable candidate and a smooth succession.

More things are changing than the group boss. Since Ratan Tata will head during his lifetime the Tata trusts that own the majority stock at Tata Sons, this will be the first time that the business head of the group is not in control of the trusts as well. This is understandable, in that a non-Tata is heading the business for the first time (Mr Saklatwala, the group chairman before J R D Tata, was a family relative). While no one can predict what will happen when Mr Mistry’s tenure ends, a good quarter century from now, it is entirely plausible that no Tata will be around at the time to claim the mantle. The Tata group has thus taken an important step towards becoming what most international conglomerates are, with shareholding control separated from management. To be sure, Mr Mistry’s family owns some 16 per cent of Tata Sons stock, but that is trumped quite comfortably by the holdings of the Tata trusts.

Mr Tata, meanwhile, can look around him at a group that he has transformed, leading it with a remarkable clarity of vision and courage in his own convictions (think cars), while maintaining leadership in several lines of business. His tenure will be remembered most for his bold moves in taking the group global, not just through the big deals but by making individual businesses think of the world and not India as their stamping ground. Mr Tata has also conducted himself with dignity and gravitas, in a country where many businessmen have sullied their personal reputation.