The Tata family, near and extended, will eventually control the all-powerful trusts and through them the group’s sprawling business interests. Mehli, who is 62, and Noel at 65 are somewhat younger than Vijay Singh, Venu Srinivasan and RK Krishna Kumar, the three other professional trustees on the board of Sir Ratan Tata Trust. But their biggest virtue clearly is their lineage and their allegiance to Ratan Tata. Mehli, in fact, crossed the family line when he opposed his cousin Cyrus and threw in his lot with Tata during their boardroom battle.
But it is this blurring of factors behind Mehli Mistry’s choice as trustee that raises the whiff of confusion. From the massive pool of talent available to the country’s most respected business, is he the best man available for the job? Bear in mind a Tata trusts trustee wears two hats — participating in decision-making related to the philanthropic endeavors and vitally in decision-making related to the business of the group.
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Six years ago Tata Sons jettisoned a formal search process and at Ratan Tata's urging brought in the late Cyrus Mistry as the group chairman. In that instance too it seemed Mistry's choice was guided by the need to have “one of us", someone related, even if tangentially, to the family, as the head of the conglomerate. That exercise ended badly leading to permanent breaching of the relationship with the group’s second largest, and till then most loyal, shareholder.
The Tata Group is now in its 154th year and into its fifth generation. That’s way more than most business families can hope to see without self destructing. Such vast conglomerates eventually run into intractable problems, some of which just don't have an easy fix. Ratan Tata's succession issue is one such. In a perfect world he would have a bunch of smart daughters and sons or even nieces and nephews to choose from. With N. Chandrasekaran firmly in the saddle as professional chairman overseeing the running of the business, the chosen one would have slipped seamlessly into the role of elder statesman — never mind her age — as head of the trusts. That option just isn’t available and leads to the piquant situation we now have. Scarred by the bruising battle with Cyrus Mistry, the Tata family needs to keep a firm handle over its sprawling business empire. That’s the easy part. The 67 percent stake the trusts have in the holding company secures that and with their boards controlled by handpicked members of the larger family, the business should follow suit.
The tricky part is the dynamic between the trusts and the chairman of the holding company. With the adoption of the resolution which bars the same person from heading the trusts and the holding company, Chandrasekaran can never exercise the same kind of authority that Ratan Tata did when he juggled both positions to perfection. What happens when the trusts as majority shareholders and the chairman as the head of the holding company differ on a crucial issue, say, the sale of Tata Steel?
When the Tata trusts were set up nearly a hundred years ago, their objective was purely to use the money they received for philanthropic good. In recent years, they have gone beyond that initial charter to play the role that owners and the largest shareholders in family-run businesses do. That’s what queers the pitch somewhat. The best that can happen is for a Tata or his proxies to control the trusts and in turn be mindful of the magnificent business legacy that they hold in their hands.
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