Of course you’d say, this is sure business piece and why we are covering it ? Well, when the CEO of a long-standing $100Bn+ business gets sacked, you’ve got to cover it. Cyrus Mistry, who was taken to be the representative of youth empowerment when he took over as the Chairman of Tata Sons 4 years ago, has been simply sacked.
While all of us celebrated a 43-year old chap leading one of the oldest and most reputed business houses of the country, Cyrus Mistry silently hopped on to the new role. But the picture was not all rosy!
Unless you have been living under a rock, you are already aware that in a board meeting yesterday, Cyrus Mistry has been sacked as the Chairman of Tata Sons leaving the entire Indian Inc in shock and disbelief. But it is not as simple as a rejig of the top management of a corporate house. Let us dive deeper and see 5 reasons why it might be more of a mess than it seems prima facie –
The Parivar Impact
As a matter of fact, Cyrus Mistry’s family firm Shapoorji Pallonji Group owns 18.4% in Tata Sons — the holding company of $100-billion salt-to-software conglomerate. Yes, so Cyrus Mistry is more than just a Chairman to Tata Sons! The family relations of Tata-Pallonji family go back to 1930s, when ‘Tata-Birla jaise ameer hai‘ wasn’t even a thing! Moreover, the 18.4% shareholding also makes Pallonji Group the single largest shareholder of Tata Sons… Ouch!
Court Kacheri and more…
Given the strong family background and the influence of Pallonji group, Cyrus Mistry is most likely to move to Bombay High Court against the decision of sacking, as per most sources. While this will not only be a setback to Tata Group, it might also be a beginning of the end of an era of Tata-Pallonji family ties. Also, the impact that it might have on the share prices and market sentiments for the much reputed Tata group is also a matter of concern. However, an insider source from Pallonji group has denied any such intention of moving to the court, for the time being.
Cyrus gone berserk and what went wrong?
While Mistry’s administrative style had been under the scanner for past 12-18 months, his vague replies to 5-year blueprint demanded by the Board, also did not go down well. The disconnect between Tata and Mistry was primarily due to the ethics, values, vision and direction that the company was headed in. Also, some decisions such as selling some of the Indian Hotels overseas properties, shutting UK operations of Tata Steel, entering into a full-blown legal assault with NTT Docomo and challenge the $1.2-billion international arbitration court’s order, were just few of the many decisions that were not digested well by Tata old-timers. While some key hirings remained under question as were done without any prior consultation, also not having a group CFO for 3 years became a major worry for many.
Chairman sacked in 4 years – a First for Tata
The gravity of the situation can be judged by the fact that no Tata Chairman was asked to step down in such a short period of time. This can be proved by the eye-widening fact that the 150-year old company had 6 chairmen in its lifetime and this was only the second Chairman outside of Tata Family. Also, one of the important things that had not been received well, was that Cyrus Mistry was not ready to give up on his Irish citizenship, which many thought should have been the first step as soon as he took over the Tata leadership.
The Road Not Taken
As we wake up to a turmoil in the biggest corporate house of the country, Bombay House must be ablaze with shock and rumors. While impact on the share prices is yet to be seen, Ratan Tata taking over as the Interim Chairman might be the only silver lining. Within 4 months, the country will see a new leader taking over Tata Sons, but how these cards unfold is going to be an interesting story. While Mistry’s leadership saw rising debts, downward trends of sales and poor returns of equity for the group, the new leadership will have huge responsibilities with such internal upheaval.
While Tata is dealing with the change in leadership, this can be seen as a new debate sparking up – Is youth leadership seen as dictatorial, insolent, aggressive and out to destroy “the core values and ethics” that our previous generations have maintained?