The power that Tata trusts wield

The Articles of Association of Tata Sons is a document that best illustrates the influence the Tata philanthropic trusts have on the group

Why did the board of Tata Sons break its silence to back R Venkataramanan, a nominee director on the AirAsia board under CBI lens, on Tuesday? Was it the most important thing on the Tata Sons board agenda that a statement was issued late evening mentioning only the AirAsia investigation and the parent group's confidence in Venkat (as the Tata Trusts managing trustee is popularly known)? While the Malaysia-headquarterd AirAsia and its India unit, a joint venture with the Tatas, had earlier countered the CBI allegations of lobbying to try and change government policies, Tata Sons had kept quiet till its London board meeting on Tuesday. And now that Tata Sons has spoken, questions are doing the rounds on the reason behind its decision to express confidence in Venkat.

Of course, the fact that about 66 per cent of the equity capital of Tata Sons is held by Tata Trusts — the biggest of them being Sir Dorabji Tata Trust and Sir Ratan Tata Trust — would have been a big reason for the board backing Tata Trusts managing trustee Venkat, who was for many years executive assistant to former Tata Sons chairman Ratan Tata. But the Articles of Association (AoA) of Tata Sons is a document that perhaps illustrates the best how powerful the Tata philanthropic trusts are, and how they have an influence on the group. 

Article 87 in the AoA, for instance, is an example of what the Tata Trusts empire, that has in the past faced governance-related issues as well as Income Tax investigations, is all about. It talks about adjourning meetings (AGM or EGM) if full quorum is not present. "If at the expiration of half an hour from the time appointed for holding a meeting of the Company (Tata Sons), a quorum shall not be present, the meeting, if convened by or upon the requisition of members (of the board), shall stand dissolved..." It adds that "if at such an adjourned meeting, the quorum is not present at the expiration of half an hour from the time appointed for holding the meeting but a representative of the Tata Trusts is present, the members present shall be a quorum and may transact the business for which the meeting was called".

Also consider Article 104 in the same document.  This is on directors (of the board). "So long as the Tata Trusts own and hold in the aggregate at least 40 per cent of the paid up ordinary share capital of the company, the Sir Dorabji Tata Trust and Sir Ratan Tata Trust, acting jointly, shall have the right to nominate one third of the prevailing number of directors on the board and in like manner to remove any such person so appointed and in place of the person so removed, appoint another person as director."  

However, only when you reach Article 118, do you realise the real power of the Trusts. This is about appointment and removal of the chairman of Tata Sons. The selection committee for appointment of the chairman comprises three persons nominated jointly by the Trusts who may or may not be directors, one person nominated by and from amongst the board of directors, and one independent outside person selected by the board for the purpose. It notes that the chairman of the selection committee will be chosen by the Trusts from amongst those nominated by the Trusts. Importantly, "the quorum for a meeting of the selection committee shall be the presence of a majority of members nominated jointly by Sir Dorabji Tata Trust and Sir Ratan Tata Trust", the AoA mandates. 

The rules of removal of the chairman are exactly the same as appointment, the document shows. As an insider pointed out, the same route was followed on October 24, 2016, the day Cyrus Mistry was removed as chairman of Tata Sons. There was a hastily called closed-door meeting at the Tata Trusts office in Mumbai early afternoon. That meeting, chaired by Ratan Tata, was to "seek the permission of the Trusts for taking necessary steps to improve things at Tata Sons". The meeting didn't last too long. Soon after, the same afternoon, Ratan Tata drove to Bombay House, the Tata Sons headquarters. And the rest is history, as they say.