Who is the New Man at the Top of Tata?

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Natarajan Chandrasekaran in Mumbai, India, on January 12, 2016. John Elliott writes that Chandrasekaran will be only the second chairman of Tata Sons not to have the Tata name. His appointment means that Noel Tata, Ratan’s low-profile stepbrother who heads some of the group’s retail companies, has for the second time been passed over for the top job. Shailesh Andrade/reuters

This article first appeared on the Riding the Elephant site.

On Thursday, India’s Tata Group began rebuilding its seriously damaged image as India’s most respected and stable conglomerate when it announced the appointment of Natarajan Chandrasekaran, 53, who had been the head of the highly successful Tata Consultancy Services (TCS), as executive chairman of Tata Sons, the main holding company.

He will take over on February 21 from Ratan Tata, 79, who had been the previous chairman for 21 years, and reappointed himself as interim chairman on October 24, when he organized a boardroom coup that ousted his chosen successor, Cyrus Mistry, 50.

Chandrasekaran began emerging as the possible choice when Ratan Tata picked him to join the Tata Sons board a day after the Mistry sacking.

It was almost inevitable that an insider would be appointed, in part because it was unlikely that any outside candidate would accept the job, given the way Ratan Tata has for the past 25 years dominated Tata Sons, the main operating companies, and the philanthropic Tata Trusts, which hold the majority of shares.

It was Ratan Tata’s unwillingness to let go of the reins and be content heading up Tata Trusts, along with beginning a new life as a venture capital investor, which largely led to the Mistry bust-up and sacking. 

It was also essential that the new chairman should be trusted by Tata and be able to work well with him, which Mistry could not. Chandrasekaran had headed TCS as chief executive officer and managing director since 2009 and, although Tata had limited involvement in its affairs, the two men have an established, mutual respect.

Tata might well also step down from the chairmanship of the Tata Trusts when a new chairman is found. Media reports from last month, which include interviews with one of Tata’s close advisers, indicate that he is willing to go when he thinks it appropriate—maybe sometime this year.

When that happens, it will mark a new era and the $100 billion group could be on its way to restoring its battered image.

Ratan Tata has been widely criticized for the way he organized Mistry’s dismissal after three years of increasing frustration and months of plotting, and for not providing coherent justification for it. He wrongly assumed that Mistry would leave quietly. In ousting him, Tata could not have had any idea of the corporate earthquake he was unleashing.

Mistry has fought back, publicly. This has led to a series of headlines containing allegations and counter allegations that have criticized Tata’s governance, and lifted the lid on the conglomerate’s businesses and its more dubious dealings.

Legal cases have been initiated in courts and regulatory tribunals, including the key National Company Law Tribunal, by Mistry and Tata. Mistry is challenging the legality of his dismissal as well as of other actions taken by Ratan Tata, and is also accusing the group of malpractice.

Chandrasekaran will be taking over a group that not only needs urgent action to sort out what’s been dubbed its “legacy” problems inherited from Ratan Tata’s 21 years in charge, but also its entanglement in a potentially embarrassing and damaging legal jungle.

In regard to Chandrasekaran’s abilities as a leader, a statement from the conglomerate says,

[The Tata Sons board] believe he will now inspire the entire Tata group to realise its potential acting as leaders in their respective businesses, always in keeping with our value system and ethics and adhering with the practices of the Tata group which have stood it in good stead.

That is not just public relations–speak. It goes to the heart of the Tata-Mistry dispute, with Ratan Tata accusing Mistry of not adhering to the conglomerate’s values and practices. Mistry denies deviating from the standards and has said that he was indeed trying to ensure the business potential was realized by operating companies that include the debt-laden Tata Steel with its loss-making Corus business in the U.K.; Tata Motors with its unprofitable Nano mini car; and Taj Hotels, which needed slimming down.

Chandra, as he is known, joined TCS in 1987, immediately after graduating from engineering college. He has played a leading role in the growth of what is by far the group’s most profitable business, India’s largest IT company, which provides 70 percent of Tata Sons’ revenue. Turnover and profits tripled while Chandrasekaran has been in charge, with annual revenues of $16.5 billion.

However, he leaves TCS at a difficult time, with Donald Trump’s likely presidential move to curb U.S. companies using offshore IT firms. At a recent TCS press conference announcing buoyant quarterly results, Chandrasekaran said the industry would be able to “tackle any headwind.”

Chandrasekaran has had extensive experience dealing with leading multinational banks and companies that use TSC’s services. In addition, he is also credited with being a strong chief executive who implemented a corporate reorganization which broke down what had been a monolith into more than 20 business units.

Both the Tata and the Mistry families belong to the Parsi (Zoroastrian) community and religion, and Chandrasekaran will be the first non-Parsi chairman of Tata Sons, marking a major break with tradition. He will also be only the second chairman not to have the Tata name (Mistry being the first). His appointment means that Noel Tata, Ratan’s low-profile stepbrother who heads some of the group’s retail companies, has for the second time been passed over for the top job.

“I like the way the peaceful Buddha can influence that giant creature,” Chandrasekaran has said, talking about his favorite painting of a meditating Buddha seated near an elephant, the Business Standard newspaper has reported. That was in 2014, long before he could have ever dreamed that one day he would be in charge of the giant Tata legacy.

John Elliott writes from New Delhi. His latest book is Implosion: India’s Tryst With Reality (HarperCollins).