Feud at India’s family biz

In October 2016, Cyrus Mistry, the chair of Tata Sons, was fired by the board, which eventually asked octogenarian Ratan Tata to temporarily assume his former post.

The Tata name is revered in and out of India. Stories abound of the generosity and civicmindedness of Parsi founder Jamsetji Tata, dubbed “the father of Indian industry,” who started his trading and steel business in 1864 in Mumbai and dreamed of lifting workers out of poverty through modern methods and ethical standards.

His eldest son Dorabji was lauded when, in 1924, he staked his personal fortune for a loan to save Tata Steel and to avoid laying off anyone.

Ratan Tata, who in 1981 took over from his uncle (who had no children), is also a humbleman. His fondness for pets had ensured that stray dogs would always be welcome in the office lobby.

For one and a half centuries, Tata was a steady bulwark, with successful transitions among family leaders with remarkable acumen and rock-solid values.

With half a million employees and revenues of about $100 billion, Tata spans industries around the globe: electronics, IT, finance, energy, agriculture, cars, hotels and more.

Boardroom fight

Mistry, the first non-family member to hold the highest post, had been chosen by Ratan himself. Ratan has no children. Mistry’s sister is married to Ratan’s half-brother, Noel.

Mistry’s family holds the biggest share in Tata Sons, with 19 percent. He also hails from the storied Parsi lineage, and was heading their family construction business when asked to lead Tata.

Mistry had the elder man’s blessing, shadowing him during the latter’s final year. The transition should have been uneventful.

But quarrels started brewing as soon as the younger man took over. Tata’s camp alleged that company performance worsened under Mistry’s tenure, with conflicts of interest due to his stakes in the construction company that continues to serve Tata, and his hiring of inexperienced executives with little street smarts to bring the company forward.

Mistry also supposedly bungled a deal with Japan’s NTT DoCoMo, causing not just financial loss but loss of face for Tata.

In turn, Mistry’s camp accused Tata of undue interference, favorable deals with friends, insider misconduct and gross mismanagement.

What the elder Tata probably only expected was respect, and when the other decided to not toe the line, conflict became inevitable.

The wild card

Worse, another Indian tycoon and board member, Nusli Wadia of the $2-billion Wadia Group, entered the fray a month after Mistry’s ouster.

Wadia’s father had been very close to the Tata family, and Wadia himself had guided Ratan early on. Wadia had at first been against Mistry as head because the latter’s father had not wanted the former’s father to be on the board.

Confused yet? Wadia eventually called Mistry’s firing “shameful.”

Many believe that Wadia’s change of heart occurred when in 2013, his aviation business, handled by his son, was declining. Wadia had longed to partner with Singapore Airlines, and reportedly became angry when the latter instead chose Tata for the joint venture, the carrier Vistara.

Of course, Wadia denied these allegations. Lawsuits among the three parties (Tata, Mistry, Wadia) are now in several courts.

In February 2017, another non-family member was chosen as chair: Natarajan Chandrasekaran, longtime CEO of Tata Consultancy Services. This was deemed a wise choice, and hopefully, under his leadership, Tata will regain the stability it once enjoyed.

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Queena N. Lee-Chua is on the board of directors of the Ateneo Family Business Center. Get her book “Successful Family Businesses” (e-mail msanagustin@ateneo.edu). Contact the author at blessbook.chua@gmail.com.