This isn’t unusual as the Tata brand is considered a national pride. A closer reading of the immediate past events suggests that there are several interlinked and thorny issues at play. So much so, the cause and effect are difficult to predict in a precise manner. The Tatas have been consistently in the national limelight ever since the elevation of Cyrus Mistry as the Chairman of Tata Sons and his subsequent removal. Post the demise of Ratan Tata, the group continues to remain in the spotlight.
CONTROL AND CONFLICT
The re-appointment of trustees at Tata Trusts, which owns 66 per cent of Tata Sons, has drawn attention due to reported fissures among the trustees. The bone of contention is believed to be over the inadequate flow of information to members of the Tata Trusts on the board resolutions of Tata Sons. Nevertheless, the debate over the listing of Tata Sons cannot be read in isolation from the discordant notes emanating from Tata Trusts. After all, the Shapoorji Pallonji Group has close to 18 per cent in Tata Sons. Much water has flown under the bridge since Cyrus Mistry died in a car accident. Since then, the Shapoorji Pallonji Group has been pressing for an exit route to cash out of Tata Sons. The listing option for Tata Sons, however, is riddled with several imponderables and could cause an unimaginable metamorphosis in the Tata empire.
POWER SHIFT THROUGH POLICY
The controversy over the reappointments at Tata Trusts has its roots in a key legal change made a few years ago. An amendment to the company law allowed trusts to exercise voting rights over the shares they held. This shift fundamentally altered the relationship between Tata Trusts and Tata Sons. Given its dominant holding in Tata Sons, this rule change has provided Tata Trusts the lever to drive the board decisions at Tata Sons through its nominee directors.
The re-nomination of trustees at Tata Trusts has become a tool for warring groups within, to strengthen their positions. How will this play out? We will have to wait. With a market capitalisation of around Rs 30 trillion, the Tata Group touches millions of lives, raising questions about whether its current structure can meet future challenges. The media attention around the dispute also underscores a definite need for transparency in governance and openness in terms of disseminating the right and required information to the stakeholders across the canvas.