25th
October 2016 was certainly a red-letter day in corporate history when the
sitting, hand-picked Chairman of the Tata group and the single largest
individual shareholder was sacked ignominiously with no prior information. The
fact that this was done through the press with vague reasons like “performance
and ethics” causing his downfall did not convince anyone.
This article would
like to present another perspective. I have had no association with the Tata
group and my comments are based on my understanding of the corporate world
after spending almost 4 decades in this fascinating yet dog-eat-dog and highly
politicized world. I have taken the liberty of using Bhishma Pitamah as a
parallel for Ratan Tata, Arjun for Cyrus Mistry and Yudhishtar for the Tata Sons
board.
Various television
channels, with dozens of corporate gurus, have been pontificating about the
Group and the key players, the flamboyant and highly visible Ratan Tata and the
underplayed and introvert Cyrus Mistry. Obviously, most of these “gurus” have
taken the side of the Tata group because that is the side their “bread will be
buttered” for a long time to come. They are questioning the use of the term
“lame duck” and the silence of Cyrus Mistry over the past 4 years. I would like
to ask these “gurus” what else could they expect from a worthy successor of
Ratan Tata who had inherited major problems, especially because he was not just
the unanimously elected Chairman but also a shareholder. Cyrus Mistry was
caught in an unenviable position – damned if he did and damned if he did not.
Had he complained about the problem, our pundit would have written his epitaph
very early stating that he was not large enough for the shoes of Bhishma
Pitamah, My admiration for Cyrus Mistry goes up exponentially since he decided
to clean-up after his more illustrious predecessor without washing their dirty
linen in public.
The doyen of
corporate India, Bhishma Pitamah Tata, who will be 79 years on 28th
December 2016, was responsible for the exit of most of the Tata group company
leaders when he took charge as group Chairman (after a rather non-descript
stint at the now defunct Nelco) built a strong brand and large global business
that had its share of big successes and equally large failures. Since 1991,
when took over as Chairman, he strode the corporate world like a colossus
buying businesses. He promulgated the “retirement” age of the Tata group at 75
years, while most companies in corporate India still keep this age between 58 –
65 years. When he announced that he would be stepping down to bring in younger
leadership, the world applauded his forward looking thinking. But like the old
wise man from the Mahabharata, he assumed that he was tied to the throne as
long as he was alive.
Cyrus Mistry, in his
very Arjunesque manner, had his eyes only on the target of increasing the
returns to shareholders and closing down failing and non-profitable businesses.
He went about his work clinically, delivering results as is evident from his
letter published in all the newspapers today. To quote him, “Despite all of the
above, during my term, the operating cash flows of the group have grown at 31%
compounded per annum. The Tata Group valuation from 2013 to 2016 increased by
14.9% per annum in rupee terms as against the BSE Sensex annual increase of
10.4% over the same period. The Tata Sons net worth has increased from
approximately Rs 26,000 crores to Rs 42,000 crores, after considering the
impairments. This has significantly strengthened our balance sheet, enhancing
our ability to absorb further shocks from restructuring in the companies.”
If this is not great
performance, I fail to understand what is! Corus, Nano, Air Asia, Air Vistara,
overseas hotels, and dozens of other businesses started the under the leadership
of Ratan Tata were not viable and the losses of these businesses will surely
have to be taken into account sooner than later because they cannot stay hidden
in the vast balance sheets and myriad of companies of the group..
The Board is equally accountable
and responsible for the developments in the Group. They cannot claim to be the
proverbial ostriches who did not know what was going on and under the garb of
seeking support, they have decided to support with a person they perceive to be
the stronger of the two. Yudhishtar, in Mahabharata was asked whether the son
of Guru Dronacharya, Ashwathama had been killed. Yudhishtar, who had never told
a lie in his life looked at an elephant named Ashwathama who Bhim had killed
and replied that “Ashwathama is dead”. Guru Dronacharya surrendered his arms
and was killed. That was a changing moment in the battle. Yudhishtar, whose
chariot, always moved a few inches above the earth, had knowingly colluded with
an untruth and his chariot dropped to the ground.
The Tata Sons Board
is no different from Yudhishtar. Not one of them had the courage to stand up to
Bhishma Pitamah Ratan Tata. Losses were significant in most companies and yet
these losses were being concealed in the books. Was there a threat that Cyrus Mistry
would expose all in his efforts to clean-up?
Board members, who pride themselves for their impeccable track record
are equally complicit since they meekly accepted the decision as a fait
accompli. Was it the threat of malfeasance and being exposed which led to this
change? If a fresh start is being looked, shouldn’t the entire board be
changed?
The Tata Trusts which
control a majority stake in Tata Sons have much to answer for as well. The
stake holders in the Trusts are not only the trustees but the very large number
of beneficiaries. What would happen to all the philanthropic work being down by
these trust if Tata Sons has to take a write down of over US$ 19 billion?
The battle has just
begun. The skeletons will start to tumble out of various closets and all the
dirty linen is being collected for being washed in the public domain. The
domino effect is only just beginning. The stock market has already wiped out Rs
23,000 crores of the Tata market value in 2 days.
The Tata group will
now come under intense scrutiny. Its accounts will be looked at, its auditors
will be questioned and its people will have to answer questions. They have
given themselves four months to find a permanent successor to Cyrus Mistry, an
uphill task but then the Board does not need to worry – they have the 79 year
old Bhishma Pitamah to run the empire for as long as it takes.
Sometimes, the moral
of the story is to “let sleeping dogs lie”!
*******************
The author is the founder Chairman of Guardian Pharmacies
and the author of the best-selling books, Reboot. Reinvent. Rewire: Managing
Retirement in the 21st Century; The Corner Office; An Eye for an Eye and The
Buck Stops Here - Learnings of a #Startup Entrepreneur.
Twitter: @gargashutosh
Instagram: ashutoshgarg56
Blog: ashutoshgargin.wordpress.com |
ashutoshgarg56.blogspot.com
http://www.businessinsider.in/The-Tata-Mistry-and-its-implications/articleshow/55114374.cms
