Dear Esteemed & Respected members,
Good Morning! Heartiest Greetings to all and your families on Deepawali.
On the above subject, I found an interesting read in the business section of Rediff.com....wanted to share with you all..............it reminded me of the 1990's when three successful chief captains in different companies of the Tata empire had to leave? Or they were ousted? My image about the Tata group of companies have been also shaken up! Or may be, I am mistaken! The article throws some light on such matters of corporate governance, as a case study. I request the members to throw more light on this, after reading the following portion of article that I am quoting!
regards,
P.S.Raychaudhuri
The halo around Ratan Tata has gone
Sudhir Bisht, October 28, 2016 (Rediff.com/ Business)
(A portion of that article).
"But by and large Ratan Tata was the epitome of a business icon who attained Himalayan heights when he ran the Tata empire and when he gave it up, he put all his might behind helping the young and budding entrepreneurs of India. One regularly heard of his angelic efforts in funding a venture here and supporting a dream there.
The perfect avuncular funding father is what we thought Ratan Tata had become. The retired man had no interest in the way his chosen successor ran the vast empire that he once ruled. No doubt the old man was still the chairman emeritus but the title was more to bestow upon him an honour well deserved but it wasn't meant to burden him with the responsibility of an executive or even a non-executive chairman.
But the developments in Bombay House shook that image of an old man blissfully enjoying his retirement. The old man had removed himself from the scene but his eyes and ears were there, dutifully reporting the board proceedings and even leaving meetings briefly to brief him and take further instructions.
Ratan Tata soon found out that the new chairman was his choice but had a mind of his own.
The young chairman was more old school than the old man. He believed in earnings per share and book value per share and not so much about legacy, sentiments and pride that come with fathering a product that was as colossal a flop like the Nano!
The young man didn't believe that brick-and-mortar businesses like steel plants and chemicals and car manufacturing could be run on the hope that one day they will become profitable, even when no strategies existed to turn them around. For Cyrus Mistry the manufacturing companies were not the Amazons of the e-business that lived on perennial hope. The manufacturer must be able to manufacture goods profitably after amortising the cost of setting up the business over a finite number of years.
Mistry also believed that charity and business were separate issues. The organisations needed to generate profits and the profits needed to be ploughed back into business and needed to be distributed among the shareholders. The shareholders then were free to decide what they did with their dividend. So Tata Sons would get their share of dividend from, say, Tata Steel and then Tata Sons would give Tata Trust its share of dividend and Tata Trust could do whatever charity it wanted to do with their money.
Tata Sons, however, couldn't dictate what charity work needed to be done by Tata Steel. That was to be decided by the Tata Steel board that was answerable to the shareholders and a majority of these shareholders were the investing public, not people with Tata surnames.
The young chairman similarly believed that a company like Tata Motors couldn't continue to be a company where Tata Sons ruled the roost indefinitely. It was owned by the public as the ordinary public's share in Tata Motors was more than 60 per cent of the conpany. "How could Tata Sons dictate to Tata Motors to continue with the white elephant called the Nano?" Mistry must have often thought.
The young man also started to question the not so transparent manner in which investments in Air Asia and Vistara were made. As chairman he was responsible for the overall corporate governance and he did appear to be uncomfortable.
He was disturbing the apple cart of the retiree who was a strange combination of venture fund-like instincts married to the old school of never hiving off old, non-yielding assets.
So Ratan Tata struck and the head of Cyrus Mistry was chopped off, figuratively speaking.
Just as he had ousted Ajit Kerkar, Darbari Seth and Russi Mody back in the 1990s, he removed his successor in 2016. Kerkar was the father of the immensely profitable hospitality business, a business that was destroyed during Ratan Tata's era. Seth was the chemicals man which was thriving when he was made to quit. It may not be in robust health today. Russi Mody was the principal architect of the steel business which appears to be in doldrums today.
If it were not due to TCS, the entire Tata group may probably have folded up today.
Ratan Tata may have grown the Tata empire to a $100 billion business but did he leave a very robust profitable business for Mistry to run? Of course not, if one excludes the TCS financials.
So I call into question Ratan Tata's legacy. It is highly overrated and the revenue growth can be attributed to inflation which would make turnover double every 6-7 years anyway. The real success should be measured in terms of market share in the businesses where Tata operated. Did the market share of the Tatas increase in hospitality business or in trucking business or in steel business or in refrigerator business or in air conditioner business? Deafening silence!
Is Ratan Tata's squeaky clean image more of an exercise in public relations or is there more to the real Ratan Tata than it meets the eye? Was he, like all business honchos, also trying to curry favour with politicians in the usual Indian way?
Not so long ago Ratan Tata spoke about intolerance in society. But he preached what he practised not. A near octogenarian couldn't tolerate the business methodology of a younger man. And he connived in a most ugly fashion to evict his successor. He says he would stick around till his new successor arrives. Sure he would leave when his mirror image arrives. But he will keep a close watch after that, make no mistake.
The halo around Ratan Tata should have gone with the Radia tapes. But the PR machinery kept the radiant figure around his head aglow. It is time to let that halo go.
And about time Tata companies that are owned by the public and not by Tata Sons alone to be freed from the clutches of Tata Sons."
Sudhir Bisht is an author and a columnist based in New
Delhi. He tweets at @sudhir_bisht.
Sent: Friday, October 28, 2016 5:55 PM
To: join_mtc@googlegroups.com
Subject: Re: [MTC Global] Sudden Removal of Cyrus Mistry from Chairmanship
Why did they at all select him to that position? Now the question of culture, values and ethics are coming to the fore...were they sleeping during the last four years! I am sure the Tata sons board members have to answer this question to their shareholders. I don't want to get into the debate of what or who is right or wrong, but I feel the entire episode is rather very shoddy and not expected from the world class Tata Group.
Dr Supriya Biswas
Kolkata
Sent: Friday, October 28, 2016 10:42 AM
To: join_mtc@googlegroups.com
Subject: Re: [MTC Global] Sudden Removal of Cyrus Mistry from Chairmanship
Dear sir
Cyrus Mistry Removal is Unparalleled in Corporate History
Tata is a brand of family business in domestic and international. Tata Group has 12 lakh crores of turnover per annum and also the group raised to top 5 place in the market capitalization. And its turnover is equal to 10 Indian states annual financial budgets.
It has wide conglomeration range from salt to software in the corporate world. Its dynasty extended across globe covering various countries like Africa and Europe, US and UK etc. Managing and governing such a big group is toughest and challenging job in satisfying all stakeholders including investors, employees, government, board and suppliers etc.
Normally in the process of managing all stakeholders somewhere and some point of time knowingly or unknowingly the interest of majority or minority stakeholders might be ignored. But that is not a serious reason for taking such a stern decision by Tata group. For resolving the issue and conflicts among the groups can be settled with Company Law Board and Courts. Taking the Company Law in the hands of individuals will spoil the harmony and trust among the investors and employees.
As we are aware that earlier Mr Ratan Tata Said that Mistry is our future visionary leader to drive the group and as such Mr Mistry has been placed as Chairman of the Group. When has taken lead the group turnover is 101 bn USD. During his tenure i.e December 2012 to till yester day its turnover is hardly improved say 103 bn USD. This is the unhappy thing to the Tata Group. Another thing is Chief Executives Committee which plays a crucial role in decision making and it comprises 3 from Pallonji Group and 2 from Tata group. This turmoil in that committee made them to remove him. But in the corporate governance, this will create insecurity in the corporate democracy and paves the scope for a big debut about the Board governance and its ethical values. And finally it may affect the market of the group and faith and trust of the investors.
Reasons for removal: Mr. Mistry had breached the ethics of the group. Tata Group's poor financials, Failure in bringing growth , Legal issues with Tata Docomo, Tata Teleservices, Clash of interest while awarding contracts, majority members from Pallonji group, Sale out of Tata Corus as it made loss in the past, No black busters in recent innovation of its new product, were the reasons behind Mr. Mistry's removal from the Board of TATA Group.
Conclusion: As per the Articles of Association of Indian Companies Act 1956 and latest Act 2013 which is a mini constitution of companies' internal administration, the removal of Mistry from Chairman Position of the Tata Group is legally unethical. Which means without giving a notice period removing him is unethical. And it also give bad signals to other corporate citizens.
--
On Thu, Oct 27, 2016 at 9:13 AM, Venkatesh Ganapathy <gvenkatesh69@gmail.com> wrote:
This episode demonstrates that Tatas need to change with the times. I am afraid Tatas is still mired in bureaucracy. However, Mistry's strategies did not work because they were short-sighted. If we have a cold, we have to go and see the doctor. we cannot cut our nose. So, if a business unit is not doing well then corrective actions are to be taken. Sacking people and selling off businesses is not the solution.
Mistry belonged to Shapoorji Pallonji Group and I am afraid that their tradition is radically different from that of Tatas. Shapoorji is a construction firm and they were into film financing business too. Culturally both groups are totally different. This example shows that even the giants can err when it comes to succession planning.
I also have a feeling that as a conglomerate Tatas is spreading itself far too thin. I don't understand why they have to be in some space at all. Their Tata Docomo mobile service is terrible. Now they are fighting with Docomo in the court.
The truth is that Tatas need to change. But they identified the wrong person for bringing about this change. At this critical juncture, Tatas do not need a leader - they need a visionary.A relative of mine worked in Tata Power and he was aghast at the way work progressed tardily. Lot of retired people would be retained by the Tatas and they had their own style of working. Every document would take at least a week for a single signature. With this kind of work ethic the fact that Tatas have survived for so long itself is a miracle!
Tatas need foot soliders now, those who can take meaningful action and steer the company forward and not those arm-chair leaders who sit in the comforts of their well-furbished AC cabins and plan business strategies.
Regards
Venkatesh Ganapathy
--
On Wed, Oct 26, 2016 at 8:49 PM, supriya biswas <supriya_biswas@hotmail.com> wrote:
This is unexpected from Tata group and has never happened before. Cyrus was selected by the board. Hence the board should correct the fatal defects in their succession plan. Infy faced such leadership crisis but NRM tackled it with extreme caution and there was no court room drama.
Dr BiswasKolkata
Sent from my Samsung Galaxy smartphone.
-------- Original message --------From: Stephen Narayanan <stepnrn@gmail.com>Date: 26/10/2016 8:01 pm (GMT+05:30)Subject: Re: [MTC Global] Sudden Removal of Cyrus Mistry from Chairmanship
Well in present scenario anyone going after Cows would definitely attract persecution & Cyrus is no exception. Not just going after Cash Cows, he even sold off Corus Steel which Ratan Tata had acquired in competition with Mittal's who acquired Arcelor for his Son-In-Law. Also see the contrast in Leadership here which is bound to come for comparison.Ratan Tata the Tata scion is gentle, humble and an accepted Leader. Whereas Cyrus was imposed as a Leader. The Atuomobile Group is still far far behind as neither there has been a Qualitative turnaround nor Sales Volume increment. Now Ratanji can't sit around till Cyrus gets it into his head to sell off Landcruiser too could he?All said and done, it is amazing that Cyrus should even think of knocking on the doors of the court. He would be exposing himself to a bigger risk there if the court were to take a view that he is not a mass leader product or that his decisions did not augur well for Tata Group. So in my opinion it would be ideal for him to say: ta-ta to TATA and consolidate his position in other Tata Business where he spent considerable time developing business in retail.
Happy Diwali Dhamaka for All.
Warm Regards,
Stephen--
Stephen NarayananFreelance Educational Consultant/Corporate Training facilitatorMob.:-9868386192
On Wed, Oct 26, 2016 at 1:04 PM, Jagan Mohan Reddy <drjaganmohanreddy@gmail.com> wrote:
Market is agog with all kinds of speculations about the possible reasons for abrupt/sudden removal of Cyrus Mistry from the Chairmanship of Tata group.
As we all know, a Leader or CEO has to be a Visionary. In other words he is somebody who should be able to make people envision their future ,as well as, energise,enthuse and empower them. In my view this is where Mistry failed and which led to his abrupt exit.
Unlike his predecessor Ratan Tata Sir, neither he could envision himself or make the individual units leaders envision about the possible way forward. He was concentrating more on cash cows (BCG matrix) leaving others to their fate. And the most important thing is he couldn't become part of Tata culture and he could not lay the roadmap to move forward.His attempts to fortify his position by bringing outsiders also has not gone well with seniors.This is an excellent case study for bschool students to reflect upon, as there is much to learn.With Diwali GreetingsJagan Mohan
--
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