Tata Group – It is time for the Big Boss to stamp his authority

What is happening in the hallowed rooms of Bombay House, is something even the Indian government is watching closely. If ever there is a time to stamp his authority for Noel Tata, that time is now.

Many differences, few solutions

The Tata group suddenly seems to be faced with a plethora of problems at the same time. At a time when the group had lost market value heavily and was reeling under Air India’s losses, a fresh power struggle is emerging. There are differences over the listing of Tata Sons, with only Noel Tata wanting the holding company to stay unlisted. RBI is yet to take a final call, but other directors are in favour of listing. For Noel Tata, exchange listing means Tata Trusts, which hold close to 60% in Tata Sons, forgo their veto power. There are also other unsavoury incidents with the ousted director of Tata Trusts, Mehli Mistry, now calling for an administrator to take over the running of Dorabji Tata Trust.

Differences are out in the open

There are many issues over which the boards of Tata Sons and Tata Trusts are clearly divided. For example, Chandra wants to continue the patient approach of the Tata group, but Noel Tata is looking for speedier results. For the first time, we have a case where Mehli Mistry has raised objections to the legitimacy of the Trusts having directors who are neither of Parsi faith nor permanent residents of Mumbai. Noel Tata and Mehli Mistry clearly do not see eye to eye. But the biggest challenge that Noel Tata is facing today is that the sense of unanimity in decision making is lost. Over the years, that was the hallmark of JRD Tata and Ratan Tata; key decisions were arrived by consensus.

Recapping the Tata group – Early 1990s

It must be remembered that controversies and management differences are nothing new in the Tata group. In the early 1990s, when Ratan Tata had just taken over, he was faced with a big challenge from company satraps. Under JRD Tata, company heads like Rusi Modi of Tata Steel, Ajay Kerkar of India Hotels, and Darbari Seth of Tata Chemicals wielded total control. When Ratan Tata proposed a more centralized system of control, it was met with defiance by the satraps. However, that was when Ratan Tata stamped his authority. Not only did he manage greater centralization of control, but also eased out most of the satraps who did not fall in line. At that point, that was necessary.

Noel Tata has to show; he calls the shots

The persistent differences in the Tata group point to just one thing; Noel Tata needs to stamp his authority. It is said that a leader can delegate all tasks, except the task of being a leader. One of the important hallmarks of leadership is to take hard decisions. Even if such decisions may look unpopular in the short run, they must be taken if they are in the long-term interests of stakeholders. Today, Tata companies have substantial institutional shareholding; and these institutions get jittery if there are internal rifts and differences in the board. Noel Tata has the big advantage of his Last Name. He must now stamp his authority and take tough decisions; even if the outcome may be unpopular!