One of the reasons that Cyrus Mistry was shown the door by the Tata Sons board was his “unsuitable” Strategy 2025 document that sought to outline the growth plans for the group. The board had been asking for the document for a while and when it finally arrived in September, it was found unsuitable, a person familiar with the developments said. The following month, the board chose to replace Mistry.
Strategy documents in the Tata group have determined the fates of others, ironically, Ratan Tata’s, too. In 1983, two years after he was made chairman of Tata Industries, Ratan Tata penned a Tata Strategic Plan that essentially said the group should foray into high-tech businesses like telecom, oil exploration services, infotech, biotechnology and alternative energies. The more controversial part was increasing Tata Sons’ stake in group companies, ideally, to 26 per cent. JRD Tata, then Tata Sons chairman, liked the first part, but that didn't automatically place Tata in the driver’s seat. On the contrary, it marked the beginning of a long innings of boardroom battles for Ratan Tata.
“The boardroom battles carved deep scars and he's shed his trustful nature. Reticent to a fault, few know his secrets, hopes and desires. He doesn't share confidences with anyone, not even Nusli Wadia, Ambani's bête noire and Tata’s childhood friend,” Gita Piramal wrote in her book, Business Maharajas. The lines seem prophetic now.
From chairman of Tata Industries to chairman of Tata Sons, it was a long road dotted with boardroom battles, of which the most famous was the one with Russi Mody. The appointment as chairman of Tata Industries had merely put Ratan Tata on the same pedestal as Nusli Wadia (chairman of Bombay Dyeing and JRD Tata’s godson), and many of JRD's independent satraps like Russi Mody (head of Tisco), Sumant Moolgaonkar (head of Telco), Nani Palkhivala (the group’s legal adviser and head of ACC) and Darbari Seth (head of Tata Tea and Tata Chemicals). “Ratan was seen as the apparent heir, never the heir apparent,” Piramal wrote.
Mody, was a clear frontrunner for the post. He was heading Tisco and JRD wanted him to take charge of Telco as well. But, Moolgaonkar, then heading Telco, refused to step down, once it came to light that JRD was planning to place Mody as head of the company, and Ratan Tata was made executive deputy chairman. The baton finally passed on to Ratan Tata at a Tata Sons board meeting in 1991 and he became chairman of the group. In 1992, Ratan Tata dusted the group's retirement age policy that set the age for directors at 70 and senior executives at 65. Mody called it a black resolution framed with Machiavellian intent.
“It divided Tisco executives, too, as signature campaigns for Ratan Tata and Russi Mody followed. Many of them who sided with Mody later went on to occupy important positions in Tisco. Once the main fight was over, all was forgotten. That's the good thing about Tatas,” a former executive of Tisco, now Tata Steel, recalled.
Also Read
In 1993, Mody was forced to resign, precipitated by interviews against Ratan Tata and top managerial changes without board consent. The exit of Darbari Seth in 1994 on the same retirement principle, was however, much less noisy. Ajit Kerkar, head of Indian Hotels, was ousted in 1997, but that wasn't as smooth.
Decades later, Ratan Tata is faced with another boardroom battle. This time, it’s against his successor and the shareholder in Tata Sons, Cyrus Mistry. On October 24, the board of Tata Sons decided to change Mistry and reinstated Ratan Tata as interim chairman, in what would go down as one of the biggest developments in India’s corporate history.
For those who know Tata, it was a baffling move, especially given that Tata moved out of Bombay House after handing over charge to Mistry so that he could function independently and be his own man. Much later Tata Sons attempted to clear the air in a nine-page statement. The key issue as it emerged was underperformance.
“The directors of Tata Sons are primarily concerned with the results of Tata Sons and their duty to all its shareholders, particularly, the Tata Trusts, who hold 66 per cent of the equity capital,” the statement said. “It’s more than just specific issues; the Tata structure was being dismantled under Mistry,” a source said.
In his defence, and before Tata Sons made the statement, Mistry wrote a letter to Tata Sons board members, saying he inherited ‘legacy hotspots’ from Ratan Tata and the group faced a potential write-down of $18 bn.
Alongside the battle being fought through the media, the main battle is being fought in boardrooms. As of now, the score is 3-2-2. The outcome of board meetings of Tata Sons, TCS and Tata Global Beverages are clear wins for Tata; the boards of IHCL and Tata Chemicals have backed Mistry while the boards of Tata Steel and Tata Motors haven’t taken clear sides.
But, Mistry has Wadia, who has earned the title of corporate samurai, on his side, unlike the Mody episode where Wadia was clearly on Tata’s side. Wadia is on the board of three Tata companies, Tata Steel, Tata Motors and Tata Chemicals. Sources familiar with the boardroom developments have said Wadia tried to sway independent directors (IDs) in Mistry's favour. In Tata Chemicals, he managed to have his way, but IDs on the boards of Tata Steel and Tata Motors were divided.
This prompted Tata Sons to issue notices to the companies, asking them to convene extraordinary general meetings to remove Cyrus Mistry and Wadia as directors. The outcome of the battle is awaited, and the key to success is with institutional investors.
Tata’s battles outside its own company boardrooms have had limited success. The history with Mamata Banerjee and Singur is well chronicled. In 2006, Banerjee led an indefinite agitation against the Nano project in Singur, which ultimately led to a Tata pullout in 2008, when the plant was almost 90 per cent complete. Ratan Tata’s famous words during the pullout were, “If you hold a gun to my head, you have two choices — either you move the gun away or pull the trigger because I will not move my head.”
When the Nano found a new home in Gujarat, courtesy Narendra Modi, then the chief minister, Tata said, “I hope there is a good M and a bad M,” in response to a question on the different approaches of Mamata and Modi towards the project. But as Tata later said, the decision to shift was a prudent one but involved a very high cost. When the Nano was announced, Tata Motors had 300,000 orders, a waiting list of close to two years, but the delay caused much of the excitement to wane. As for the land in Singur, it is in the process of being returned to the farmers, after the Supreme Court quashed the acquisition in August.
On the corporate front, the Tata group made two unsuccessful attempts to acquire Orient Express Hotels. In 2007, Orient Express spurned an offer and said an association between the two companies would dilute the value of OEH brands. Tatas backed off, but in 2012, the group made a $1.2 billion unsolicited bid to buy OEH.
After a year-long chase, Indian Hotels finally dropped the plan. Mistry's letter to the Tata Sons board members, in fact, says that IHCL's international strategy was flawed. But that's just one among the many issues that he has raised.
The spotlight is on Bombay House and the outcome of the Tata-Mistry battle will be the defining one for the group.
THE BOARDROOM BATTLE
1981: Ratan Tata becomes chairman of Tata Industries
1991: JRD Tata passes baton to Ratan Tata
1992: Ratan Tata brings to the fore the Tata group's retirement age policy
1993: Russi Mody forced to resign
1994: Darbari Seth resigns
1997: Ajit Kerkar is ousted
2016: Tata Sons replaces Mistry, Ratan Tata becomes interim chairman