Ratan Tata vs. Cyrus Mistry, A Battle of Ideology?

Trouble erupted in India’s largest business house, The Tata Sons. Board of the 107 billion dollar salt to software business conglomerate,  sacked her present chairman, Mr. Cyrus Mistry and brought back Mr. Ratan Tata as interim chairman. Incidentally, Mr. Ratan Tata had handed over chairmanship of Tata group of companies to Mr. Cyrus Mistry in 2012, before he retired from active life. 

Exact reason behind Mr. Mistry’s removal is not out in the open. There are many opinions for and against the dramatic decision. Many had questioned ethics of firing chief executive so abruptly. Mr. Mistry has also shot a letter to board of directors, which he also leaked to media, claiming lack of independence in running the organisation and many perceived impropriety in past decision made by last chairman. No one can doubt integrity of Mr. Ratan Tata. He is considered a legend.  By his own admission, Mr. Ratan Tata considered Mr. Cyrus Mistry to be a humble human being.  Infact, this quality was one of the reasons Mr. Mistry was chosen as successor to Mr. Tata. It is unfortunate that two people fell apart. 

According to Mr. Mistry, he had inherited a business that was haemorrhaging from several sites. Mr. Mistry wanted to get rid of loss making business ventures of Tata group and improve profitability. What Mr. Cyrus Mistry did as chairman of Tata Sons was absolutely correct. It was his job to do the right thing. It should be remembered though, despite, most Tata group of companies ran on the slow lane, Tata group has always paid dividend to her share holders. Infact, it was during tenure of Mr. Mistry dividend amount was slashed.

But, Tata group of business is run by Tata trusts, which holds majority 66% shares.  “Tatas buy institution, not business”, as some would say. With institution comes people,  their emotion, their need for a job, and responsibility to put food on table. Many Tata group of companies were under performing. Yet, overriding philosophy of Tata group of companies is to weather bad times and turn around a loss making company.  

Clash most likely is over philosophy of running the Tata group of companies. Should profitability be the guiding light or social responsibility may also play a role? Mr. Tata conceived Nano car when he saw a family of four riding a scooter on a rainy day. He wanted to do something for this segment. Nano may be non profitable. But it has deep sentiment attached with it. JRD Tata started Tata Airlines which was nationalised post independence. Mr. Rata Tata may have tried to revive family legacy when he invested in Air Asia. 

In this battle of ideologies, nothing else is really of consequence  – performance, integrity, hardwork, cashflow. Only thing that matters is company values and thought process. One can question operational strategy of Tata group, can one really question the sentiment? If sentiment is lost, the whole philosophy of the group may fall apart. That is the fight, to retain philosophy.

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