 "Photo: Kamlesh Pednekar")
As the Ratan Tata and Cyrus Mistry fight moves to the next phase, Tata’s confidant and Tata Trusts trustee R K Krishna Kumar talks to Niraj Bhatt about the way forward, impact on the Tata brand, selection of the new chairman and other issues. Edited excerpts:
What is the way forward for Tata Group?
We have to wait for the extraordinary general meetings (EGMs) to get over. There will be a new chairman for these companies and a new charter protecting the operations of these companies. I personally think the Tata governance structure is one of the best in the world. As far as the regulatory requirements are concerned, we are truly compliant.
Is there a possibility that the Tata Sons resolution to oust Cyrus Mistry might not go through in a company or two?
My sense — and I am not looking at the detailed numbers — is that institutions are beginning to see that continuing with the Tata Group tradition is in the best interest of investors. Therefore, I don’t see a problem of this arising in any EGM. Everybody is seeing that a company can’t be splintered and remain a Tata company.
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What happens to the Mistry family’s 18.5 per cent shareholding in Tata Sons?
That would have to be addressed. I believe that shareholding can only be sold to existing shareholders, and can’t be sold to a third party. I don’t know what line they would take, whether they remain shareholders or exit with the consent of majority shareholders. It will be governed by the agreement.
What are your views on independent directors, considering the group’s operating companies have them in large numbers?
Independent directors are not supposed to act in concert; they are not a sub-body in the board. An independent director is supposed to take an independent decision in the best interest of the company in regard to the various steps that the company is taking to improve its performance and improve the leadership and quality of the board. It’s very unusual for independent directors to act as one group. It is not supposed to be a union of independent directors.
What is the progress on selecting the new Tata Sons chairman?
The committee has met more than twice and it is very active. They have to select the next chairman by February and should zero in on the candidate by the end of January or early February. After the due process, we will have a new chairman.
Will it be someone from India or abroad?
I am not on the committee but I do know there is no restriction on the person being Indian or from abroad, or internal or outsider. It is complex stuff and they are looking for the right candidate, who will imbibe and fit into the Tata culture, and lead the group to more prosperity.
Is there any thought on whether the Tata Sons chairman might not necessarily be the chairman of operating companies?
Since Mr Ratan Tata became chairman, it has been the convention that the Tata Sons chairman is also chairman of major operating companies. When JRD Tata was Tata Sons chairman, he was also the chairman of the big operating companies for some time. Subsequently, professionals such as Darbari Seth, Russi Mody and Ajit Kerkar were made chairmen of operating companies. It will be a mix, going forward. Generally speaking, it is better to have the Tata Sons chairman to be the chairman of operating companies. But there could be some modification.
Brand Tata has seen some erosion in the past few weeks. How do you plan to revive it?
The Tata brand is 149 years old and has withstood many challenges and I would like to put this behind, along with the EGMs. The fundamental claim to its survival is trust: Consumers pay a premium for Tata Salt and Tata Tea because they come from an honest and ethical house. At the Tata Consultancy Services EGM, we were overwhelmed by the emotional reaction of small shareholders and institutional investors, and the trust they continue to have in the brand.
I would like the group companies to focus on their strategic plans and provide value to their shareholders. I hope and believe that the values of the group, which are anchored to Tata Sons through Tata Trusts, remain intact. That would be the best influence on governance. Foreign institutions talk about governance but look what happened to governance in the 2008 financial crisis or Volkswagen last year. There are selfish interests but I don’t expect our group to go that way. We do a selfless job for the welfare of our community, shareholders, stakeholders and our country and I believe that is the best way of governance.
Two-three years later, when you look back at this controversy, and see how the group has come back to do the right things in the right manner, you will not be too concerned about the damage to the brand. It will be business as usual because at the heart of this, there is no personal interest. This is not a battle between Ratan Tata and Cyrus Mistry as has been made out.
So what is the battle about?
About whether the group continues as one integrated unit, the battle is strongly based on values enshrined in the Trusts and does what it has successfully done in the last so many decades. Or does it get split into bits and pieces, where one chairman says this is not a Tata company. I would like this whole group to remain a Tata enterprise, rather than in bits and pieces.
How do you see the role of the Trusts?
It is very unfortunate that the Trusts have been dragged into this. The Trusts are not benefiting any individual or family but stand for the founder’s vision: What you earn from business, you return to society. If the Trusts have done this job for over a century, how can it be misgovernance? It is a bogey that has been raised. We will make sure that all the current issues are reflected properly. My personal hope is that the great values enshrined in the Trusts continue to influence the operating companies on an ethical basis.
What about the questions that the Trusts’ nominees on Tata Sons board request from operating companies?
Trusts’ nominees on the board of Tata Sons are going to ask for information from operating companies only where it impacts the investments of Tata Trusts as majority shareholders of Tata Sons. They will not ask for price-sensitive information.
What are the expectations of the Trusts from Tata Sons, and operating companies?
We expect dividend flow from Tata Sons. We hope the dividend flow from Tata Sons will not be dependent entirely on one company, even if it is Tata Consultancy Services. Dividends should be diversified and other Tata companies should also do well and bring steady dividend flow to Tata Sons, and from there to the Tata Trusts.
Do you have a succession plan for Tata Trusts, too?
Yes, only two months before the imbroglio, we had discussed putting a succession plan for the Trusts in place. It is in process.
