Tata Sons: A Step In A New Direction

Just minutes before the world heard the news of the new chairman-in-waiting, Ratan Tata had individually called each of his leading CEOs in Bombay House on the phone to inform them about the board’s decision. Many were stunned.

Cyrus Mistry’s long-standing assistant Vasu at SP Centre, the group’s HQ in South Mumbai, too had fielded calls from senior colleagues across the SP Group asking if the news was true. Vasu too had no clue that his boss was about to become the talk of town.

Ironically, Mistry’s induction into Tata Sons in 2006 wasn’t without its share of drama. It took almost a year after his father stepped off the Tata Sons board in 2005 upon his retirement, for him to be invited to join the board. Some insiders claim Mistry wanted both his sons Shapoor and Cyrus to be accommodated on the board in line with the size of his stake. But RNT was clear:  “Mr. Mistry has no right of nomination,” he told a business daily. “If there were a member of the Mistry family that comes on the board, it would be to represent the shareholding — if we chose to make that happen. Mr. Mistry himself came on the board, we recognised him as the largest shareholder.”

Eventually, when Cyrus did join the board, it coincided with perhaps the most tumultuous period for RNT and the Tata group. Many game-changing decisions, including the audacious bid for Corus and JLR and the TCS public listing, were debated at the board.

Apart from contributing his opinion at the quarterly board meetings, whether Mistry made any overt contribution to the group’s strategy is unclear. He did make a favourable impression on the chairman and the rest of the board as someone who was analytical, intellectually curious and yet humble. “Ratan Tata has a lot of confidence in Mistry. Tata would ask Mistry for his opinion and views in meetings and on important decisions,” says J.J. Irani, who served on Tata Sons’ board till June this year.

During the five-year period, RNT is said to have developed a comfort factor with the young Mistry. After all, he was decidedly low-key and had the temperament to think long-term. That proximity to RNT proved to be a decisive advantage over any other candidate. “Tata is an institution and has a certain kind of culture. We wanted someone who is very ethical and understands this culture and understands what governance is all about,” says Lord Kumar Bhattacharyya, a British businessman who served on the search committee to select the next chairman. Besides, age was on his side.

“We didn’t want someone who would be there for five years to ruin things and then disappear,” adds Bhattacharyya.