Ratan Tata with Cyrus Mistry. (Source: PTI)

Bombay House Coup: An Insider’s View Of Tata-Mistry Spat

“I was stupefied,” says Mukund Rajan when Cyrus Mistry told him that he was being removed as the chairman of the Tata Group. Rajan, who spent over two decades at the Group in various senior leadership roles, opens up in a new book titled ‘The Brand Custodian: My Years With The Tatas’. In a freewheeling chat with Harsha Subramaniam of Bloomberg News, Rajan offers a ringside view into the Ratan Tata-Cyrus Mistry spat, the role of Tata Trusts and much more.

Watch the full interview here:

Here are the edited excerpts from the interview:

When Cyrus Mistry took over as chairman, you mention in the book that you had apprehensions about him, and then subsequently you changed your mind. Why?

When Cyrus was appointed, people felt that his ownership in the company had something to do with him being seen as a potential candidate. It came as a surprise because he was part of the selection committee for the chairman. Initially, people like me, who didn’t know him well had some skepticism whether he had all it took to fill the giant shoes. Over time, I got to know him well. He was astute, strong on financials and had a clear understanding of how value creation will take place. I saw a very strong overlap between the kind of values he would profess and what [Ratan] Tata would talk about. For me it was tragic to see him and Tata fall apart.

Oct. 24, 2016 when Mistry was removed as chairman of Tata Sons. You were in Bombay House. What happened that morning?

That morning, I was busy in a normal day’s work. Suddenly, early afternoon, I received a call from Cyrus’ secretary saying the boss wants to see you immediately. There was a certain tone in his voice which suggested some calamity was either waiting to happen or has already happened. I raced up to Cyrus’ cabin on the fourth floor of Bombay House. The first thing he said was, “You need to know that I have been removed from chairmanship.” It took me a few minutes to register what he was saying. I never expected to hear the chairman of a group who was presiding over such a large organisation would be removed with no warning or intimation. The next thought was if he was going then who was coming. When he said Ratan Tata, I could have keeled over. Tata was not somebody who wanted to hang on in the office or had any desire to do this till the end of his life. He often said “I would not overstay my welcome in this building”. I said but there is a retirement policy that Tata crafted that said 75 years and for subsequent directors it was 70. I asked what happens to that. Cyrus said we changed the policy in the board meeting. I was totally lost.

When this spat happened, were you caught in the crossfire? Were you forced to take sides?

Many people who were close to Cyrus and in positions of responsibility were clearly approached to figure where our sympathies or loyalties lay. That was sad. Some colleagues on the group executive council were removed with no notice. That’s bad. If you have an institution which prides itself in the way it treats its people and has performance evaluation system and feedback which is discussed at the board, you don’t take peremptory actions of this kind and treat people badly. I couldn’t understand what was happening at that time.

This episode put the spotlight on the equation between Tata Trusts and Tata Sons. In the book, you say that the Tata Group is an unusual capitalist organisation owned by public charities. What is the problem in the structure as you see it?

The issue is that the trusts are the majority shareholders of Tata Sons. Tata Sons is unlisted. But it controls the fortunes of at least 30 of India’s leading listed companies. It is an unusual structure. You can question whether there is sufficient scrutiny and assurance of good governance at Tata Sons to give confidence to the markets and investors. At Tata Trusts, there has been enough debate on whether a charitable institution should be getting involved in how the business side of organisation is being managed or run. In the last few days, there has been commentary on what Azim Premji has done with Wipro shares and the foundation. It is telling that in that case economic benefits of Wipro stock will go to the foundation but not voting rights. So, there is a question of how charitable institutions should operate.

In the past, the chairman of Tata Sons was also the chairman of Tata Trusts. JRD Tata and subsequently Ratan Tata. It dispelled some of the governance-related question marks at both institutions. That changed under Cyrus Mistry. Cyrus became the chairman of Tata Sons but not of Tata Trust and that’s the case with Chandrasekaran. The question is what is the best form of governance at both institutions? Is the framework you have in the past fit for purpose in the future? That is the question which I raised in the book. I have suggested that you could look at valuation of the trusts’ holding in Tata Sons somewhere in the region of $80-90 billion which could make them the richest charity in world. How would you extract that money? One option would be to consider listing of Tata Sons.