Pathetic Ratan Tata

Santanu Chowdhury says in The Wall Street Journal: Our comments are in red:                                          

In his second letter emailed to the around 600,000 employees at India’s largest conglomerate following the news of Mr. Cyrus’s departure, Mr. Tata said “this difficult decision, made after careful and thoughtful deliberation, is one the board believes was absolutely necessary for the future success of the Tata Group.”
This is an admission that the past performance was not adversely affected by Cyrus Mistry. Future is anybody's guess. It is easy to demonise anyone by quoting future possibilities. Ratan Tata has taken on an astrologer's role. Pathetic!

“As a group, we are steadfast in our resolve to maintain the Tata culture and value system that all of us have worked so hard to nurture over the decades,” Mr. Tata’s letter said. What is this cliched term 'Tata culture'? Does it include sacking a person sans objective reasons? Does it only mean subservience to Ratan Tata?“The focus has to be on ‘leading’ rather than ‘following’,” he said. And only Ratan Tata can lead?

In the letter, Mr. Tata said he was excited by the opportunity to “maintain stability and continuity of leadership,” while also “looking forward with equal excitement to the finalization by the selection committee of a world-class leader to be the new chairman of the group.” Stability of leadership and whimsical dismissal of Chairman do not go together.

Cracks in the Bombay House

Cyrus Mistry's letter / email to Tata Sons board subsequent to his ouster from chairmanship contains serious allegations on the lack of propriety on the part of Ratan Tata. He has alleged that Ratan Tata continued to boss over him and never allowed him to be independent. C.Sivasankaran, a friend of Ratan Tata, was granted unmerited loan by Tata Capital which turned sour. R.Venkataramanan, a protege of Ratan Tata, brought pressure on Cyrus Mistry not to reveal a corporate fraud in Air Asia. Mistry was not provided any clue at any time that his performance was poor.

It is incumbent on SEBI and stock exchanges to probe the matter fully in order to protect interests of shareholders of the group companies. Even if Mistry and Tata patch up, SEBI and others cannot abdicate their fiduciary responsibility to investing public. Obviously, all is not well in the state of Denmark.

It is becoming clear that Ratan Tata is touchy about his legacy and cannot tolerate anyone undoing it even by way of clearing the mess. His teflon image is losing its magic and his feet of clay are becoming visible.

Rumblings in Bombay House

Cyrus Mistry, Chairman of Tata Sons, has been unceremoniously shown the door. He occupied the prestigious and demanding position for less than four years whereas the Tatas are known to have faith in long-term performance.

Prima-facie, Ratan Tata has acted like Narayana Murthy of Infosys. There is of course a difference. Murthy is actually a founder of Infosys whereas Ratan Tata is only a legatee-promoter. He was not born in the family of promoters, he was adopted in. Therefore, Ratan Tata is not entitled to the extenuating psychological excuse of inability to let go of one's creation. Ratan Tata has acted like a typical psychopathic boss who can tolerate only those who do his / her bidding.

During Mistry's chairmanship, the Tata companies did perform well despite tough circumstances. Ratan Tata knows only too well how stormy his own initial term was. Mistry has been sacked when he has just settled down and started taking tough decisions like how to manage Corus. Mistry initiated the process of disinvesting white elephants to facilitate deleveraging. A man struggling midstream needs help to swim ashore.

Ratan Tata had earlier eulogised Mistry's willingness to learn and his humility. If the latter had taken some missteps, he could have been corrected. Ratan Tata through apparent penchant for backseat driving has let down Tata shareholders. It is worth revisiting what we thought when Cyrus Mistry was anointed as Chairman:

http://srivarahan.blogspot.in/search?q=cyrus+mistry

The Succession Charade

Ratan Tata has announced that Cyrus Mistry, the son of  Pallonji Shapoorji Mistry and the brother of Noel Tata's wife, will succeed him as the chief of the Tata group. As reports go, Cyrus Mistry is a cultured gentleman who espouses humility and respect for governance. Prima facie, the choice is apt. Though only 43, Cyrus Mistry is well experienced in construction business and apparently receptive to advice from well-wishers.

Ratan Tata had earlier observed that his half-brother, Noel Tata, is not experienced enough to succeed him. The question that arises now is: Is Cyrus Mistry more experienced than Noel Tata? The answer may not be reassuring. Ratan Tata also made a mysterious remark, perhaps more philosophical than pragmatic, that Noel Tata's lack of readiness to head the Tata empire was partly his own making. This enigmatic statement gave the game-plan away.

Earlier, a 5-member committee was formed with a great deal of fanfare to do a "global search" for the successor. A world-wide search was made for more than a year only to discover that the target was in Tata's backyard. This brouhaha was, in retrospect, a deceptive ploy. Shapoorji Pallonji's family owns about 18% of Tata Sons. This family seems to have asserted its rights to manage the business empire. This is what happens in many business groups and there is nothing ethically wrong about this development.

However, what is disconcerting is the elaborate drama that was enacted to make us believe that the group was professional and mature enough to delink ownership and management completely. The search committee owes it to the Tata shareholders to inform them the rationale for the ultimate selection. There is no doubt (based on what information is available in the public domain) that Cyrus Mistry is a good choice. It is doubtful however if the committee could not have found a better choice.