Ratan Tata

vs
Cyrus Mistry

Board Room War By

Group 1
Change Masters (NMP)

Apurva S Nagmote – Roll No: 15

S Krishna Prasad – Roll No: 27
CKN Manikandan – Roll No: 29

1
The Saga
 Oct 2016 – Tata Sons remove Cyrus Mistry as
Executive Chairman
 Ratan Tata takes over as interim Chairman
 Nov 2016 – All Tata Group’s listed companies conduct
EGMs to remove Mistry from the top job
 Dec 2016 – Cyrus Mistry resigns from Directorship of
all Tata Group companies / Mistry firms file case
against Tata Sons with NCLT
 Jan 2017 – N Chandrasekaran (TCS top boss + veteran)
appointed as Executive Chairman of Tata Group
 Feb 2017 – Mistry removed as Director of Tata Sons
 Mar 2017 – NCLT dismisses Mistrys’ plea for action
against Tata Sons
 Apr 2017 – Mistry moves NCLAT with review petition
 Jul 2018 – NCLAT rules in favour of Tata Sons &
dismisses Mistry’s allegations on all counts
2
The Bone of Contention
 Lack of alignment between the group and the way Mistry
led the business. Efficiency vs Ethics and philanthropy.
 10 crores election funding for Odisha state elections
proposed by Mistry to safeguard Tats groups mining
interests in Odisha.
 Tata Groups 2 bids for a 60000/- crores Army project
where 2 Tata companies partnered with different
companies.
 Mistry’s acquisition of Welspun group’s renewables assets
worth 9000/- crores without taking the Tata Sons Board
into confidence.
 Mistry’s proposal to tie up with US pizza chain Little
Caesers.
 Issue of fees and commissions paid to directors of group
companies posting losses and withholding payment of
dividends to shareholders.
 Ratan Tata’s inclusive style of leadership vs Cyrus
Mistry’s professional touch.
 Civil contracts being awarded to Shapoorji Pallonji Group
with a potential conflict of interest. 3
Cultural Clash & Ethical Dilemmas
 Mismatch of agendas.
 Mistry’s decisions argued on maintaining reputation of the group and
efforts to clean up the books.
 Ratan Tata wanted to maintain the philanthropic employee centric culture.
 Mistry – carried restructuring & had reservations on high dividend payouts
to the promoters.
 Tata moved amendment to AoA to ensure steady dividend flows to the
promoter Trusts (rules of engagement between the Tata Trusts, Tata Sons
board, the chairman and operating companies)
 Tata Sons – ingrained with strong ethos & culture of philanthropy.
 Mistry - outlined the various challenges faced by group & with “a large
debt overhang” on account of heavyweight acquisitions.
 Mesh that is Tata Sons
 Operationally inefficient structure. Every Tata company had to convince its
own Board as well as Tata Sons Board.
 Complicated holding structure making it difficult to articulate clear lines of
responsibility.
 Multiple dividend taxes paid by group companies and then Tata Sons.
 Tata Sons not a listed company so rights of minority shareholders not
protected.
 Tata felt a need to institutionalize the synergy between Tata Trusts & Tata
Sons, since the chain was breaking for the first time in decades.
4
 Management lessons
 ”Resonant Leadership” important to create shared vision between
incumbent and successor.
 Cohabitation period of 3-4 years for incumbent and successor depending on
the complexity of the organisation.
 Succession planning is the most important task for any Board. Anticipate
and plan for it instead of waiting for the event to occur.
 Succession planning to be viewed as an on-going process and not as a one
time activity.
 Focus on development of C-suite candidates and not replacement. Potential
CEOs should be given on the job training to maximise chances of success.
 Role of institutional investors in succession planning. Can act as an
important pressure group.
 Succession planning to be driven by line functions and not HR. HR to be
involved but should not drive the process.
 Board should not outsource the job. Internal involvement necessary for
proper ensuring culture fit.
 Succession planning to take into consideration the culture and the future
strategic direction of the organisation.
5
 Success Stories
 Lucent Technologies – 2 step process of talent identification and
talent development coupled with well laid out capability
framework.
 Leadership development at GE.
 Leadership Development Academy at Crotonville with dedicated bandwidth for
successor development.
 Reginald Jones developed Jack Welch who in turn developed Jeff Immelt.
 Dr. Reddy’s Lab – Indian family owned business
 Anji Reddy transferred all the assets in the name of the trust to be managed.
 Ranbaxy - After the death of Parvinder Singh, DS Brar a professional
manager took over and was very successful.

6
 References
 http://theconversation.com/tata-succession-battle-is-an-omen-for-family-firms-in-asia-67998
 https://www.livemint.com
 https://www.thehindubusinessline.com/companies/tata-cyrus-a-clear-case-of-the-need-for-succession-planning/article9267984.ece
 https://economictimes.indiatimes.com/news/company/corporate-trends/ratan-tata-vs-cyrus-mistry-why-all-eyes-are-now-on-
egms/articleshow/55949107.cms
 https://www.thehindubusinessline.com/companies/tatas-succession-for-cyrus-mistry-the-challenges-ahead/article23066067.ece
 https://www.financialexpress.com/opinion/cyrus-mistry-vs-ratan-tata-the-only-solution-is-to-break-up-tata-sons/454224/
 https://www.financialexpress.com/opinion/cyrus-mistry-vs-ratan-tata-the-only-solution-is-to-break-up-tata-sons/454224/
 https://www.thehindu.com/business/Industry/conflict-of-interest-led-to-cyrus-mistry-removal-ratan-tata/article18716146.ece
 https://economictimes.indiatimes.com/news/company/corporate-trends/the-real-inside-story-of-the-ratan-tata-cyrus-mistry-
breakup/articleshow/55862287.cms
 http://www.businessworld.in/article/Tata-Sons-A-Bitter-Pill/30-11-2016-109044/
 https://www.business-standard.com/article/companies/how-india-inc-goes-about-succession-planning-117112200041_1.html
 https://www.peoplematters.in/article/leadership-development/dynamics-of-succession-planning-
17321?utm_source=peoplematters&utm_medium=interstitial&utm_campaign=learnings-of-the-day
 https://www.peoplematters.in/blog/corporate/the-corporate-succession-story-tata-group-infosys-16526
 https://www.fortuneindia.com/people/the-successor/101157
 https://www.emeraldinsight.com/doi/full/10.1108/HRMID-11-2017-0167
 https://www.slideshare.net/siddubey16/succession-planning-india
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