How Ratan Tata is gearing up for his transition in December

Prince Thomas
Updated: Aug 6, 2012 12:12:08 PM UTC



To the outside world, Ratan Tata is more known as chairman, Tata Sons, which is the holding company of the group. But those close to him have noticed Tata play another role with equal zeal over the last 21 years. One of them is RK Krishna Kumar, among Tata’s closest aides over these years and someone who has seen him wear one more hat too - that of chairman, Tata trusts, the founding family’s group of philanthropy bodies. And it was a few years ago in Kolkata that Kumar was struck by the “seamlessness” with which Tata wore both the hats.

It was one of those troubled days of Singur, when Tata was trying his best to swing the ground conditions in favour of his pet Nano car project. He was in and out of the Writers’ Building, the secretariat building of the West Bengal government in Kolkata, meeting his team and addressing press conferences. “On one of those days, in the morning he chaired almost a four-hour meeting with senior Tata Motors officials on Singur,” recounts Kumar. After lunch, Tata came back for another round of equally intense meetings, this time with the officials of the Tata trusts, which were setting up a cancer hospital in the West Bengal capital. “It was amazing that he was able to chair both the meetings with no reference of one in the other. It was seamless,” says Kumar, who is also a trustee on the boards of several of the Tata trusts.

Detractors might only deem it natural that Tata would want to set up a hospital to gather popular support in a state where his most ambitious project was collapsing. But the decision to set up the cancer hospital in Kolkata had a more scientific basis. “In our Tata Memorial Hospital in Mumbai, we realized that almost 35 per cent of the patients were coming from the eastern part of the country,” says AN Singh, managing trustee at Sir Dorabji Tata Trust (SDTT), the biggest of the trusts. To further prove his detractors wrong, not only were the hospital plans continued with despite the debacle of the Nano plant in West Bengal, but Tata himself inaugurated the medical institution on the outskirts of Kolkata in May 2011.

During his growing-up years in the group, which he joined in 1962, Tata is said to have learned and imbibed a lot of qualities from his uncle and boss JRD Tata. He only had to look up at the same role model for his responsibilities at the trusts too. JRD was the chairman of the group and also chaired the trusts from 1938 to 1991, when he entrusted his nephew with both responsibilities. As RM Lala, the well-known Tata biographer, told me, “I was a member of the trusts for almost two decades. For many of these years, JRD was the chairman. Not for once did JRD put pressure on me to do something. There was absolute freedom. It was the same when Ratan took over,” he said. (To know more about my one-and-a-half hour conversation with Lala at his house in Colaba, Mumbai, do look out for my upcoming blog - RM Lala’s insights on JRD Tata and Ratan Tata’s leadership of the trusts).

Tata’s 21 years at the helm of the family’s trusts reflect a similar personality. He kept his responsibilities at the trusts and the group separate. In fact, like a former Tata Steel official told me to his utter bewilderment, even some of Tata officials couldn’t understand it. “Once we had taken a project proposal to the trusts to be implemented in Jamshedpur. It was refused. Some time later, we saw one of our competitors implementing a similar project with the help of the trusts!” As Singh of SDTT told me later, there was an important reason for this “differentiation”. Explains Singh: “The trusts own 66 per cent of Tata Sons and get dividend from this shareholding. As philanthropy bodies, the trusts enjoy tax benefits. So to use the same money for projects by group companies is not right.”

As Tata approaches his 75th birthday later in December this year and prepares for his retirement from Tata Sons, it is difficult to say if he would have continued to play a role at the trusts had his successor been a ‘Tata’ and not a ‘Mistry’. But it is for sure that he was preparing the trusts for challenges in the changing socio-economic environment.

In an interview to Synergos – a US-based non-profit organization - in 2005, Tata had noted, “Philanthropic institutions in India still believe they're charitable and therefore must operate on shoestring budgets, that creating an organization is almost a luxury. This needs to change -- they have to recognize that a non-profit has as much responsibility for being professionally run as a corporate body.” At the same time, he had also noted the challenge in doing so, especially in India where, according to online data portal GuideStar, more than 3 million NGOs have been registered, out of which at least one-third of them are active at any given time. “From our own grant giving (through the trusts), we have found that the greatest challenge is to find appropriate, professionally managed grantees or NGOs. It's one of our biggest problems. There are a lot of calls for money but there is often inadequate professionalism and management, which doesn't give us a lot of comfort in channeling money in that direction,” Tata said. (To know what Tata did to prepare trusts for this and many more challenges, read the cover story of Forbes India issue 17th August, 2012)

Cyrus Mistry was chosen as Tata’s successor in November 2011. Immediately, there were questions on what the outgoing chairman was going to do in his ‘retired’ life. In his recent interview to senior American television journalist Charlie Rose, Tata said that usually after retirement, “you want to do things that you had wanted to do”. That might have meant spending time in his new house overlooking the sea in Mumbai, revving up his fast cars or flying jet planes. But as clarity came for those in Bombay House, it was clear that Tata had some other plans too. He gave a glimpse of his plans to Rose. He wished to touch more lives at the bottom of the pyramid. At the trusts, he said, “We will focus on rural development, conservation of water and my most visible goal is to do something in nutrition in children in India, and pregnant mothers because that would change the mental and physical health of our population in years to come.”

When I asked Singh about this, he explained, “Mr Tata had realized that lack of nutrition breeds poverty. A nutrition-deficient mother gives birth to a weak child who later grows up to enter the reproductive cycle to again have a child that is not very healthy. He always stressed that we needed to break this cycle.” Similarly, in the field of water, Tata was disappointed that even after 60 years, majority of the country still didn’t have access to potable drinking water. As you would read in the upcoming feature in the next issue of Forbes India, Tata also has major plans to promote research in India.

Many of Tata’s predecessors in the family have chosen to donate their wealth and shares to the trusts. Tata also owns equity in some of the group companies, including in Tata Motors, in which he increased his stake to 0.05 per cent in June by buying shares worth Rs 10 crore. A news report a few years ago had put the value of Tata’s shares in group companies at more than Rs 1,000 crore. Will Tata too, like his grandfather did to set up the family’s first trust, bequeath his wealth to the society? My guess is as good as yours.

The thoughts and opinions shared here are of the author.

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