A boardroom fight, an attempted veto and government intervention have plunged the Tata Group, one of India's most revered institutions, into a fight over its future. Who actually controls India's biggest company? A bitter power struggle over the 158-year-old conglomerate with more than a million employees worldwide and $180 billion in annual revenue has become a test of who calls the shots in Indian capitalism: owners, professional managers or the government. The conflict pits the family-led charitable trusts that own two-thirds of Tata Sons against the powerful chairman who runs its businesses.
India's government has emerged as a wild card, pressing Tata Sons to list on the stock market — a move that could permanently reshape ownership and weaken the founding family's control. The dispute simmered for at least a year before bursting into the open. In August, Natarajan Chandrasekaran, one of India's most celebrated chief executives, stunned the business world by announcing he would not seek another five-year term as chairman.
He cited opposition from one board member to his staying beyond February. That "absence of unanimous support" would hurt the company when "many strategic projects" are under "critical stages of execution," he wrote. "Clarity on leadership is important for employees, investors, partners and other stakeholders." A month later, he reversed course. At a Sept. 17 meeting, a majority of the board voted to reappoint him.
Noel Tata, a board member and head of the Tata Trusts, a group of public charities that owns 66 percent of Tata Sons, had cast the sole dissenting vote. Mr. Tata called the vote to reappoint Mr. Chandrasekaran "illegal" because it had bypassed his veto. Later that day, he wrote that Mr. Chandrasekaran had "freely" chosen to resign and that it was time to "turn the page." Since then, his office has filed dozens of legal motions preparing to challenge the vote. The dispute could reverberate across Indian businesses, where founding families retain control of many largest companies, even when professional managers run day-to-day operations.
Amit Tandon, founder of Mumbai-based Institutional Investor Advisory Services, said he could not recall any other board mutiny against a controlling shareholder in India. About two-thirds of the country's biggest companies are family-owned, he said: "Business families will see the dispute as a warning that ownership alone does not guarantee control." India's business dynasties don't want their hired managers wresting control of companies that families spent generations building. Natarajan Chandrasekaran's supporters see a different threat.
They argue that the Tata Group is too important to India to be governed by antiquated ownership arrangements or the whims of a founding family. Vijay Singh, a former secretary of defense who served on the Tata Sons board and remains a trustee of some of the seven charities that own it, draws a clear distinction between ownership and management. The trustees "may be owners, but they're not entitled to run the companies," said Mr. Singh, who supports Mr. Chandrasekaran. "The charities and the business were meant to be unconnected." The stakes are enormous because Tata is woven into almost every facet of Indian life.
Arrive in Mumbai on a Tata-owned airline and you can ride in a Tata-made taxi to a Tata hotel, passing billboards for Tata real estate or Tata life insurance. The tea in your room may be Tata's. So might your watch or jewelry.
If you are reading this on a new iPhone, there is a good chance it was assembled in India by Tata. Few countries have a corporate institution quite like it. Tata is trusted, even loved, not just for its products but for its philanthropy.
The Tata Trusts support cancer hospitals, scientific research, nutrition programs and the performing arts.
Source: New York Times Top Stories · Summarized by HeadlinesBriefing