Nobody in Bombay House could have missed the significance of Tatas speech. Only a few weeks earlier, he had manoeuvred Kerkar off IHLs board. That Kerkar had transformed a company that owned one hotel in Mumbai into Indias largest hotel chain seemed of little relevance to Tata. What mattered more was his single-point agenda: to get rid of the satraps who refused to fall in line with the new order.
The assertiveness with which Tata spoke at the meeting was rare. It also seemed to mark the successful completion of an exercise he started the day he took over as group chairman in 1991.
Kerkar was the last of the powerful Tata chiefs who ran their companies in an extremely individualistic manner and considered their jobs virtual sinecures. True, all of them contributed immeasurably to the success of their companies. But their tussles with Ratan Tata were inevitable. As Nani Palkhivala, once a powerful Tata chief, said: While JRD Tata would allow his top managers to function the way they liked as long as they delivered, Ratan wants them to follow a strict code of conduct and discipline.
It began with Russi Mody, then chairman of flagship Tata Iron and Steel Company. Mody, then 75, had served more than 50 years in the company and was considered the most powerful (and colourful) of the Tata chieftains. Till Ratan Tata became group chairman, he considered himself JRDs successor.
When Tata took charge, he introduced a significant change for senior management: executive directors on company boards were to retire at 65 and non-executive directors at 75. This disqualified Mody from the chairmanship of the Jamshedpur-based steel giant. Mody naturally balked at this and a messy battle followed.
Modys undoing was to lobby the government. This damaged his relationship with the Tatas beyond repair and, when the move failed, he had no choice but to pack his bags.
Darbari Seth, former chairman of Tata Chemicals, was the other satrap whom Tata had difficulty taming. Like other satraps, Seth ran Tata Chemicals almost as a personal fiefdom but he was able to emerge from the battle with some gains. In fact, where Mody failed to get his chosen successor Aditya Kashyap appointed managing director, Darbari Seth was able to ensure that his son, Manu Seth, succeeded him as managing director. The move attracted some cynosure in Bombay House but mostly for Ratan Tata for endorsing dynastic rule.
And where Mody had little option but to leave the group, Seth was able to ensure that he was made Tata Chemicals chairman emeritus, though he had to relinquish the chairmanship in Tatas favour. Today, Seth is also a director on the Tata Sons boards, the group holding company.
Despite all this, Seth has little say in the group. In fact, during Tatas battle with Kerkar, Seth was reportedly advocating a rapprochement between the two. That Tata ignored this advice and went for the kill shows Seths importance in the Tata empire.
This year, Nani Palkhivala tried to raise a banner of revolt by claiming that the cement major ACC was not part of the Tata group. This would have excluded him from the groups retirement policy. The tussle went on for some time before the two suddenly decided to bury the hatchet.
Soon enough, Palkhivala was made chairman emeritus of ACC and he continues on the Tata Sons board. No less significant is the fact that Palkhivala has supported Ratan Tata on all major issues, including the chairmans battle against Kerkar. In fact, Palkhivala played a crucial role in discrediting Kerkar in newspaper interviews.
In many ways, Kerkar got the worst deal. All the other satraps Mody, Palkhivala and Seth have retained Tata benefits after retirement either in the form of directorships in Tata Sons or other perquisites. Kerkar turned 65 this June and according to the Tata retirement policy could have continued as IHLs non-executive chairman till 2007. But Kerkar was pressured to quit not only IHL but all its subsidiaries. Bombay House maintains that Kerkar had lost Tatas confidence because of various deals, alleged Fera violations and his tendency not to consult the board. Kerkar says the real reasons for earning Ratan Tatas displeasure still elude him.
Whatever the reason, one common factor binds all the four satraps: they were favourites of JRD Tata because they delivered. Ratan Tata obviously has a different yardstick for evaluating his chief executives. The story of the last six years in Bombay House is ample evidence of that.
