Statesmen versus CEO: Institutions above individuals

The avalanche of comments about the Tata group has been mind-boggling and I regret contributing to this through this article! A difference of opinion between leaders could not be resolved through discussion, and a planned separation has speedily ended the differences. I note, admittedly through the rear-view mirror, that the institution has been placed above individuals. That is a good thing. 

On August 12, the chairman of Tata Sons wrote that he would not offer himself for reappointment in February next year. What would happen next? Rabindranath Tagore had written: “Who will take over my responsibility asked the evening sun, The world was silent upon hearing this question, A tiny mud wick lamp then spoke and said, To whatever extent I am capable, I will light up the world.” (Ke loibe mor karjo kohe sandhyar ravi, Shuniya jagat rohe niruttar chobi, Matir pradeep chilo, shey kohilo swami, aamar jettukko shadyo, koribo ta aami). 

Remember how Indians thought of Lal Bahadur Shastri when he succeeded Jawaharlal Nehru? Likewise, when Ratan Tata succeeded JRD Tata; and when Cyrus Mistry donned the mantle of leadership from Ratan Tata in 2012. 

If, however, a successor is not announced simultaneously with the exit of the incumbent, then the focus shifts to the circumstance of the exit. Any professional chief executive officer (CEO) serves with support from the board, and lack of clarity may well imply that his or her service may have played out its role. 

Corporate leaders’ half-life has shrunk over the past few decades. That is the Tata experience as well. Over 144 years till 2012, Tata Sons had just five chairmen. However, in the 15 years till 2027, the same group will see three. This fact should be viewed as part of more rapid changes in the leadership environment. 

I feel that the purushartha of Tata (its purpose) has been pretty much maintained for over a century and a half: To serve the nation and society through enterprise. I respectfully disagree with the view that Tata needs to reassess what it stands for (Business Standard, August 20). Investment in, for example, electric vehicles, batteries, defence, and chips do prioritise national needs. Air India faced an unprecedented bunching last year of high prices of aviation turbine fuel, no-fly over regions, and the unfortunate Ahmedabad accident. The foray into smartphones and semiconductors would have pacified the atma of the late FC Kohli, who bemoaned that India (and Tata) had missed the microelectronics revolution. And all this without affecting the expenditure on philanthropy! 

The recent developments do provoke some questions, but not regarding purpose. Here are three. 

First question: Has Tata “gotten away” with engaging in multiple businesses? 

It is argued that one chairman cannot understand so many domains. However, domain knowledge resides in the operating company. Managers in Tata Consultancy Services or Tata Motors Passenger Vehicles think of nothing but software or mobility. They suffer no distractions. Tata Sons’ representatives on their boards play their fiduciary roles as directors. Tata Sons/Trusts thus acts as a “spiritual” holding company with a fiduciary role (Business Standard, June 27, 2026). 

Tata is a unique loose-tight structure, in which the operating companies are public, and the holding company is private. The operating company’s board (which the Tata Sons chairman may or may not be part of) provides the perspectives required for the business. This distinctive structure allows the maximum domain flexibility for its operating companies. 

The Tata mandate for its companies is to adopt some things: First, a brand equity and brand promotion agreement to uphold the Tata way; second, a company and personal code of conduct; third, a commitment to excellence through the Tata brand excellence model; fourth, accountability for decent and competitive returns from the business over the long term. 

Unlike most global companies, Tata Sons is not listed. It owns shareholding in its 26 listed companies as also in several unlisted companies, apart from supporting investment in new ventures like semiconductors. Recent media reports applaud how GE and Honeywell have “unlocked” value by spinning off their businesses. In that sense, Tata is permanently in a “spunoff state”, and value stands permanently unlocked. 

This is one reason why many feel that the “secret sauce” of having the holding company private plus operating company public should not be lost. Listing Tata Sons will be damaging to the ethos and long-term perspective of the group. Further, there is a commercial reason for not listing, which is the holding company discount. 

Which sensible enterprise would accept a loss of philosophical moorings and the application of holding-company discounts to satisfy a regulation or for reasons of visibility? 

Second question: Does Tata need a tighter capital allocation system? 

This question implies that Tata Sons has a method, but the method could do with sharper analysis and execution. This is a fair suggestion. What has worked well in the past can surely be improved for the future. 

Third question: Does Tata Sons have a method of producing multispectrum statesmen? 

The group chairman must fit culturally, be operationally savvy, but also demonstrate multispectrum statesmanship (MSS). MSS shapes the future of industry, society, and the nation while building successful enterprises. MSS differs from CEOs through scope, the time horizon, and responsibility. 

This requirement demands a methodology to develop statesmen through multiple domains. Hence, leaders in Tata Sons need a distinctive capability. Does Tata Sons programme this?  

In short, there is a good chance that the stability and organisational capabilities of Tata will produce the immediate results. In the longer term, improved capital allocation and future-ready, statesmen-leader development are issues for the firm.  

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The writer’s new book, Chanakya And Sun Tzu: A Business Lens on Trade, Thought, and Travel, has been coauthored with Nirmala Isaac

gopal.mindworks@gmail.com