Tuesday, October 25, 2016

The Curious Case of Bombay House

Picture from Internet
Article first published in +DailyO India Today

When Ratan Tata talked of “intolerance” rising in the country — at the Founder’s Day function of a public school — he was certainly not referring to what was brewing in the corporate empire that he presided over till a few years ago.

Even in hindsight — it could not have been a diversionary tactic. As the media went on an overdrive trying to interpret the political import of a generally apolitical Tata’s statement and was busy reporting the feud in the ruling political family of Uttar Pradesh , the young chairman of Tata Sons, appointed less than five years back with much fanfare, was removed unceremoniously in a bloodless boardroom coup.

Cyrus Mistry can enjoy quiet meals in dhabas with his chauffeur without the paparazzi chasing him.
Not much is known — or will probably come to light in a hurry — as to what might have preceded such a momentous decision by one of India’s largest (and arguably, the most well known, internationally) business conglomerate, though theories and conjectures are bound to surface.

However, from a lay external observer’s view, the following come across as interesting:

- The move obviously took Cyrus Mistry by surprise just as it apparently caught corporate India and the financial press unawares.
- If there were performance issues , they would have come to the table at board meetings and in a highly porous corporate culture of this country, there would certainly have been a whiff in the air;
- Over the years, despite having started on a tentative note, Ratan Tata had acquired a larger-than-life image and he not only remained the public face of the group, his personality undoubtedly held sway in the Tata empire not just because of his surname;
- While the internal Directors would have easily fallen in line with the group’s thinking, it would have required some very compelling reasons to convince the eminent external directors on the board;
- All things said, Mistry was the nominee of the largest shareholder of the Group (Shapoorji-Pallonji). For the Independent Directors to endorse such an extreme action, there must have been some overriding “ethical” (not necessarily integrity but “governance” related such as “conflict of interest”) considerations; it would be unfair to assume they would have gone along with the majority view.
- In a somewhat intriguing move, it seems Ratan Tata wrote to the Prime Minister apprising him of the Board’s decision. Whether the change of guard in a major corporate house merits such an intimation can be a matter of debate;
- Any shareholder tussle would normally be thrashed out first at a different fora before coming up to the Board — which is normally the place for stakeholders’ dispute resolution;
- Surely, the Tatas would have been alive to the possibilities of legal fall-out, especially with Mistry’s father-in-law being one of the very eminent jurists of India — Iqbal Chagla, son of the legendary MC Chagla. Not surprisingly, there is already talk of Mistry approaching the Bombay High Court for relief;

That brings us to a new development in Corporate India — when aggrieved senior executives are increasingly taking their former employers to court. This can be attributed to a number of factors.
First, high-stake CXO appointments are now stitched with elaborate legal contracts with severance conditions explicitly spelt out. With multi-million paycheques, head honchos are easily able to pay for expensive legal help that their poor predecessors could not afford. In an increasingly litigious society, law firms too are much more willing to take briefs against potential corporate clients.

Mistry’s appointment was prefaced with a much publicised “global search” by an international head-hunting firm stretching over two years. Finally, when Mistry — the scion of the largest shareholder — was brought in from the cold, many felt it was an elaborate charade. Now, that again a “hunt” has been insituted — one wonders what surprise it will throw up this time.

Finally, leadership transition in professional organisations is as prone to withdrawal afflictions as indeed it is in family-owned enterprises. And, it does not help to have a charismatic predecessor keeping a benevolent eye over one’s shoulders.

No matter how the drama plays out in the coming weeks — Mistry can enjoy quiet meals in dhabas with his chauffeur without the paparazzi chasing him.

But, the question people are asking is whether this was Tata Sons’ Samajwadi Party moment — and who is the Amar Singh in Bombay House?