10/25/2016

ChangesincultureandmanagementstylewereseentoerodevaluesTimesofIndia

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Changes in culture and management style were

seen to erode values
TNN | Oct 25, 2016, 04.00 AM IST

UMBAI: Seasoned Bombay House watchers offer

illuminating pictures of how the Tatas handled the Corus
acquisition (under Ratan Tata) in contrast to the messy

divorce from DoCoMo (under Cyrus Mistry) to underscore

the change in management styles+ and perhaps explain Mistry's abrupt
dismissal.
A top investment banker recalled that Credit Suisse had offered Tatas a
nancing package that helped it aggressively outbid its Brazilian rival for
Corus Steel in the UK. Once the deal was done, two other MNC banks
approached the company's top brass with a more comfortable funding
plan involving cost savings of about $400 million. As Tata Steel weighed
in favour of the new funding option, Credit Suisse fetched up with a letter from the Tatas showing its commitment to $120
million in fees whether or not the nancing was availed from it.
Bombay House top brass was left fuming that a bank had the temerity to place a demand on them. But when the matter was
taken up to the then group chairman Ratan Tata, his decision was simple: There was a commitment made to Credit Suisse
which must be honoured. Having paid the European bank, Tata Steel went ahead with the cheaper nancing option.
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Almost a decade later, Tata is telling DoCoMo, the Japanese partner in the troubled telecom business, that it would honour a
put option to buy out at a pre-determined price but with a caveat. It would have to comply with Indian regulations. It's a small
tweak to the much storied magnanimity and commitment of the Tatas. DoCoMo has already won the arbitration and blamed
Tata's adamant stance for not resolving the dispute. (RBI had rejected Tata's proposal to pay a price which is higher than the
'fair value' to buy out its Japanese partner's stake after the nance ministry told the central bank to 'stick to the rules', leaving
the issue to be resolved through arbitration).
"For a nuanced Tata watcher, this was a big change. In the past, Tatas would have told a battery of lawyers that there's a
commitment and they must nd a way around the problem," says the person quoted above. "The philosophy out there was that
we would be ne in the long run," he adds, while explaining how this has served the group well over time. "What is the Tata
Group? A string of under performing companies, if you exclude TCS and JLR, but strutting around because of the value system
it rmly holds," says a person who has worked with the Bombay House extensively.
Was Tata Changing?
Also, there were indications that the group was getting preoccupied with decimal points, with a newfound eagerness to gather
the last rupee. This was a mindset shift which roiled the Japanese ally and stymied other divestment plans aimed at deleveraging the group's nearly $25-billion debt, says the banker mentioned earlier. It also surprised some insiders, including the
Trusts that control Tata Sons, the holding company of the diversied salt-to-software behemoth. The Trusts started taking a
keen interest in Mistry's new book-keeping ways.
Not just that. The handling of a harassment case at a group company, involving a senior functionary, led to considerable
consternation among old-timers who were left fretting at the ways Tata was changing. The complainant had approached the
chairman before quitting the job in disquiet. "The message from the top to a distraught employee didn't bet the group or the
post," says the second person, cited earlier, with access to the group.

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With the Tata Trusts turning their attention to the recent developments, strategic decisions across group companies were
being elevated to the Tata Sons board. This reduced the space to maneuver for Mistry.
Some observers believe the trusts weren't fully in sync with the functioning of the Group Executive Council set up by Mistry,
which worked closely with the boards, CEOs and senior management of Tata companies. There was strong criticism of GEC
members Madhu Kannan, Nirmalya Kumar, and N S Rajan who now face an uncertain future. The Trusts, which have majority
voting rights in Tata Sons' board, had started assessing the changed management style and its impact on the group which is
facing sluggish growth.
5th Year That Wasn't
These developments came to the forefront even as Mistry entered his fth year as chairman and was due for, most thought, a
routine renewal.

Mistry, who spearheaded Shapoorji Pallonji Group before taking over the mantle at the Tata Group, was perceived to be
attempting to secure his position by building strong ties with the country's political establishment. Some of his GEC appointees
reportedly advised Mistry that as Tata chairman he had an opportunity to play a bigger role with the establishment at a time
when the credibility of most business houses stood diminished.
Mistry had a different management perspective and perhaps needed time to evolve. His backers saw in him a chairman who
struggled with a difcult global economy and some unwieldy acquisitions he inherited.

Mistry, only the second group chairman not to have a Tata surname, was initially part of selection committee searching for
Ratan Tata's successor. He so impressed fellow committee members during deliberations detailing what a future Tata
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chairman should be like that they actually gave him the job. In the end, it didn't quite work out. "Ratan Tata is a big picture
man, a visionary. Mistry brims with energy and is very hands-on (for a Tata chairman). The change was very 'in- your-face' for
the old-guard," one of the senior-most CEOs at the group said. He had to go.

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