When torn at the top it is perhaps par for the course to expect a cacophonous torrent of public statements justifying conflicting points of view. That this could unfold at the Tatas, a beloved brand known more for its do-goodery and trust than for internal conflict, fault finding and simmering mistrust, has left many baffled and bewildered.
The 158-year old institution is at the centre of a debate between owner and management control, a favourite topic in the land of family-led businesses. Faced with the prospect of public listing as mandated by the regulator- the Reserve Bank of India (RBI), the Tata Sons reappointment of N Chandrasekaran as chairman for a five-year term did at first glance conjure up a benign image of stability before an impending IPO. Not quite. Tata Trusts, the leading shareholder, was quick to characterise the move as illegal. In a note, brimming with legalise declared: “The resolution seeking to reappoint Mr. N. Chandrasekaran in the Board meeting today (Thursday, September 17th), with four Directors voting in favour, and Mr Noel Tata (chairman, Tata Trusts) against, was a legal nullity in view of the provisions of the Articles of Association of Tata Sons.”
There are broadly two issues that emanate from the developments – one is about ownership & control of Tata Sons & through it the Tata Group and the other is about listing. On both accounts, there are questions galore. As for listing: while it is arguably not the best of times for an IPO thanks to the ongoing internal struggle, a more fundamental question is whether the listing is indeed warranted? Can it be challenged? In what timeframe should the listing happen? Also, the quantum of shares? After all, it is entirely possible that even post the listing, Tata Trust ends up with a majority shareholding and thereby retaining its say in the election of the board and its chairman.
On the issue of control, the appointment as chairman of various Tata listed companies is always co-terminus with the appointment of chairman of Tata Sons. For instance, the Tata Trust has brought up the issue of the AGM of Tata Sons (where Tata Trusts hold approximately 66 per cent of its equity). Since, the AGM could not be held, sees reasons to question even the directorship leave alone steering the board as its chairman.
Even if a term extension prevails, few expect a smooth ride ahead with the management and the largest owner not in sync but forced to engage on a daily basis.
For the moment, it is back to wait and watch the extent of nerves that each side is endowed with. Those who have studied the group and known Tata leaders over the years, fear the schism taking its toll and things getting messy. Not quite the image, a venerable institution with presence in strategic areas and businesses across the board with a combined market capitalization of publicly listed stocks around Rs 35 lakh crore spanning across some 20 publicly traded companies.