Chandrasekaran's exit brings 158-yr-old empire at a governance crossroads

The decision by Tata Sons chairman N Chandrasekaran not to seek another term has put the spotlight on the Tata group’s governance structure, raising questions beyond the chairman’s succession.

 

Experts flag the need for avoiding friction between Tata Trusts, Tata Sons' board and its professional management as one of the biggest challenges facing the conglomerate. 

 

They also highlighted issues around respecting the boundary between shareholder oversight and board of directors' managerial responsibility as well as independent directors' role as consensus builders among leadership. Tata Trusts control 66 per cent of the group’s holding company Tata Sons.

 

The influence of Tata Trusts extends beyond its majority shareholding.

 

Under Tata Sons’ Articles of Association, the two principal Trusts—the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust—can jointly nominate one-third of the holding company’s directors as long as they collectively hold at least 40 per cent of its ordinary share capital.

 

The Trust-nominated directors also have affirmative voting rights on certain reserved matters under Article 121, giving them an effective veto over key strategic decisions.

 

“This means that philanthropic bodies effectively steer one of India’s largest conglomerates. This duality has created recurring tensions, and resolving it is essential for smoother leadership continuity and long-term stability,” said Amit Tandon, founder and managing director, Institutional Investor Advisory Services.

 

Tata Sons sought to create a formal separation between ownership oversight and management in 2022 by amending its Articles to prevent the chairman of either of the two principal Trusts from simultaneously chairing Tata Sons. The latest impasse, however, raises the question of whether separating the two offices is sufficient when the controlling shareholder continues to exercise extensive board-level rights.

 

Tandon said that he did not expect the leadership transition to impact operating businesses that will continue to run with independent boards, strong management teams, and clear strategies.

 

“Chandra’s decision to step aside avoids a face-off and gives Tata Sons time to plan succession,” Tandon added.

Trust structure

While many business groups in India follow a trust structure, experts said it works as long as the promoter, the board and professional management are on the same page.

 

“Whoever steps in will need to have a good, amicable relationship with Tata Trusts and will also have to deal with capital allocation to loss-making companies, whether listed or unlisted,” said Shriram Subramanian, founder and managing director of InGovern Research Services.

 

Although Tata Sons is an unlisted private company, decisions taken at the holding-company level have implications for 26 listed Tata group companies, which had a combined market capitalisation of $277 billion as of March 31, 2026. The Tata group employed more than one million people and recorded aggregate revenue of $185 billion in 2025-26.

 

Tata Sons also remains registered with the Reserve Bank of India as a systemically important, non-deposit-taking core investment company and has been retained in the Upper Layer of NBFCs, even as its application to surrender its registration remains under examination.

 

Subramanian said the listing or non-listing of Tata Sons is a matter is outside Chandrasekaran’s control and suggesting that he is solely responsible for it would be unfair.

Subramanian added that there is no requirement that a Tata must necessarily succeed Chandrasekaran as the Tata Sons chair.

 

“Across Indian business groups, promoters are increasingly becoming shareholders while companies are run by professionals. That is a natural transition as companies mature and promoters step back,” he said.

Resolving differences

Chandrasekaran, in his letter to the board members, said that there was no resolution regarding the proposal for extension of his tenure since the February 2026 board meeting. He also spoke about the need for clarity on leadership which is important for employees, investors and other stakeholders.

 

Corporate lawyers pointed out that at the holding-company level, such an impasse can have implications beyond the tenure of one individual, particularly in relation to leadership continuity, succession planning and strategic decision-making.

 

“It also raises a broader governance question as to whether there are sufficiently clear institutional mechanisms for resolving differences between the controlling shareholder and the Board,” said Sonam Chandwani, managing partner, KS Legal & Associates.

 

Governance experts said the Trusts, as controlling shareholders, are entitled to scrutinise performance, capital allocation and leadership.

 

The concern arises when the boundary between shareholder oversight and the board’s responsibility for managing Tata Sons is unclear, or when disagreements cannot be resolved through a defined institutional process.

 

Chandwani said that the real governance test for Tata will be whether its future leadership and strategic decisions are determined through a transparent and institutionalised process, with appropriate respect for the respective roles of the shareholder, the Board and management, rather than being perceived as dependent on individual relationships.

Lessons in governance

This is not the first time a leadership change has exposed fault lines within the Tata group. A decade ago, Cyrus Mistry’s ouster raised similar questions after his differences with the Tata Trusts culminated in his removal as Tata Sons chairman in 2016.

 

“The lesson is that there has to be alignment between the promoter and the professional chief executive or managing director of a company. In this case, there appears to have been a misalignment between the promoter and the board,” Subramanian said.

 

The role of independent directors has also come into question, with experts highlighting how IDs on the board could have played a stronger mediating role in addressing the differences.

 

Tata Sons’ annual report for 2025-26 showed two continuing independent directors on its board—Harish Manwani and Anita Marangoly George—after Ajay Piramal ceased to be a director in August 2025. 

 

This has also raised the question of whether the holding-company board has sufficient independent weight to mediate differences between the controlling shareholder and professional management.

 

“Independent directors as an institution are very weak. If an ID is dependent on his directorship for income, then they will compromise on every step. People appointed to such posts should not be your friend but be of eminence,” said Pavan Kumar Vijay, founder, Corporate Professionals, a financial and legal consultancy firm.