The Tata Succession Story

Mr. Ratan Tata has formed a committee of five to decide on his sucessor. He himself is not part of the committee.

Most leaders of family-managed businesses do not go through such a process. They decide on the successor and decision makers around them approve the decision.

On the same vein, Ratan could have had breakfast with Mr. Pallonji Mistry (the other significant shareholder in the group), and decided to appoint Mr. Noel Tata as successor. Noel, for the uninitiated, is cousin of Ratan and son-in-law of Mr. Mistry. He has not had much exposure with any of the major companies in the Tata group.

That Ratan has gone for a committee, speaks well of him. The great JRD did not go for that approach, when he anointed Ratan as his successor. Has Ratan gone far enough along the path of "corporate governance correctness"?

A professional company would appoint a committee of independent directors in such a situation. Who are the five luminaries in Ratan's committee?
1. Mr. NA Soonawalla has been a close associate of Ratan for decades. Can we expect him to do anything that Ratan would not approve of?
2. Mr. RK Krishnakumar too owes his corporate success to Ratan. Another person who is likely to toe the Ratan line.
3. Ms. Shirin Bharucha has been legal adviser to the Tata group for over 5 decades, and involved in many Tata trusts. What's in it for her to go beyond the family to push for an outsider?
4. Mr. Cyrus Mistry is son of the above-mentioned Mr. Mistry. Noel is his brother-in-law.
5. Lord Bhattacharyya, founder of Warwick Manufacturing Group, has been advising Ratan since his early days. He is one person who is likely to express an independent view.

The score is thus 1-4 against any real independent view in the committee. The committee may thus end up becoming Ratan's mouth-piece.

A couple of interesting things have happened in the last few weeks:
1. Talk has started of how Ratan's successor needs to have international expertise. Around the same time, Noel took charge at Tata International.
2. More than a decade ago, R Gopalakrishnan, left Hindustan Lever when he was passed over for the top slot there. It was the rumoured that he may be groomed to take over from Ratan. Gopal has now chosen to step down from the Tata Motors board for "personal reasons". Is he second-time unlucky? Will he step down from more boards when his directorship comes up for re-appointment?

The intention is not to question the credentials of Ratan - or the 5 luminaries in the committee - or Noel. Everyone has built up a name over time. One only wonders whether the committee approach is an eye-wash to give a professional face to a decision that is already taken.

Interestingly, in the 1980s, JRD opted for Ratan after passing over corporate satraps like Mr. Russi Modi (Tata Steel), Mr. Ajit Kerkar (Indian Hotels) and Mr. Darbari Seth (Tata Chemicals). To be fair, Ratan proved his worst critics wrong. (Though, Ratan himself would be wishing he had not become another text book case of leaders making brave, but mistimed, acquisitions towards the end of their reign.)

Will history repeat itself, with Noel following the footsteps of Ratan? The signals will be clearer by March 2011.