Bolstering Tata Sons top deck a priority for Mistry

Written by MG Arun | Mumbai | Updated: Jan 14 2013, 06:49am hrs
Tata Group chairman Cyrus Mistry, who talked of winds of change in his New Year letter to the salt-to-software conglomerates over 400,000 staff, would need to speedily strengthen the top deck at holding company Tata Sons and effectively juggle youth and experience to bolster leadership across the group, close observers of the group say.

With most directors on the Tata Sons board set to retire over the next two years, and almost all of them now continuing in a non-executive capacity, Mistry will need to bring in new and younger talent at the top in quick time, they say.

When he took over in 1991, former chairman Ratan Tata was aided by an eminent group of directors but just as he, they have either retired or are set to, giving Mistry an opportunity to infuse new blood into the 145-year-old group.

At present, apart from Mistry (44), the Tata Sons board comprises RK Krishna Kumar (74), Arunkumar R Gandhi (69), Farrokh K Kavarana (68), R Gopalakrishnan (66) and Ishaat Hussain (65).

In 2011, the $100-billion-plus Tata Group fixed the retirement age for executive directors at 65. It also lowered the retirement age for non-executive directors to 70 years from 75, based on the recommendations of a panel constituted to hunt for a successor to Ratan Tata. However, those directors who crossed the age of 70 could continue till they are 75 years.

This would mean that Kumar, vice-chairman of Indian Hotels, has just one more year with the group. Gandhi, a chartered accountant who helped Tata acquire large companies overseas, would have just another year before he retires, while Kavarana, also chairman of Tata AIG Life Insurance and Tata AIG General Insurance, has just two.

Mistry will now need to look both within the group and outside for leaders. There has been a thrust on young leadership into the group in the recent past. R Mukundan is managing director of Tata Chemicals, while Brotin Banerjee is managing director and CEO of Tata Housing. Both are products of the TAS formerly the Tata Administrative Service, a leadership development programme conceived by Ratan Tatas predecessor, JRD Tata.

Meanwhile, N Chandrasekaran (50) has been having a good run as managing director and CEO of Tata Consultancy Services since 2009. More recently, Madhu Kannan, 38, who was the CEO and managing director of the BSE, joined Tata Sons as group head, business development, in 2011. Some of these young leaders are likely to move on to the helm of Tata Sons, experts say.

Ensuring continuity of experience will indeed be a challenge, says Morgen Witzel, fellow, Centre for Readership Studies, University of Exeter Business School and author of the book 'Tata The Evolution of a Corporate Brand'. Fortunately, there are a number of very talented younger but experienced managers and executives in the group. Over the past few years the group has been very good about promoting such people and bringing them into positions of responsibility.

Cyrus Mistry is not short of talent to choose from, he added.

Many experienced generals had hung up their boots in the group. Over the last three years, the Tata Sons board saw one resignation and three retirements.

Alan Rosling, a moving force behind the group's globalisation efforts, left in 2009. Noshir A Soonawala, vice-chairman of Tata Sons and chairman of the listed Tata Investment Corporation, retired in 2010, while JJ Irani, credited for the turnaround at Tata Steel, retired in 2011.

Kishor Chaukar, known for his skills at ideating and incubating new businesses for the group, stepped down as managing director of Tata Industries in August 2012.

The lowering of the retirement age would mean that apart from many on the Tata Sons board, other group veterans, like former TCS boss S Ramadorai (now its vice-chairman), Tata Motors vice-chairman Ravi Kant (68) and Tata Steel former managing director B Muthuraman (67) would retire from the group over the next two to three years.

How critical will it be for Cyrus Mistry to ensure that he brings in experienced as well as young talent on the Tata Sons board According to Nirmalya Kumar, professor of marketing and co-director of the Aditya Birla India Centre at London Business School, age is not really the issue as everyone on the board will have over 20 years of experience, so nobody is young. What is essential in each individual on the board is integrity and sound judgement. What is desirable in the mix of board members is that they have the diversity of experience needed to accomplish the vision for the Tata Group that Cyrus Mistry has.

Experts say that it would be imperative for Mistry to bring in independent directors on the boards of all Tata companies, as they would bring in fresh ideas and competencies, apart from fostering healthy interaction in the boardroom. According to CSS Rao, an expert on corporate governance issues, a mix of directors drawn from inside the organisation and outside would be appropriate. Some exceptional talent from outside the Tata Group would be a welcome addition to the boards of various Tata companies. For instance, from ITC or Oberoi to the Taj Hotels board or from German steel companies to Tata Steel and so on. If the board of Tata Sons is open to such additions from without, that would significantly benefit the group.

It is likely that the board of Tata Sons will have to have a prudent mix of senior loyalists who must be continued, blended with a sprinkling of younger directors drawn from present senior positions in the group (typically those in their 40s and early 50s). The latter will learn quickly from the former, says Rao.

Will Mistry find ensuring continuity a challenge London Business School's Kumar begs to differ. In a group like the Tatas, I think continuity is not really that big a concern at the board level. Most board members hang on too long in my opinion, he says.