There is a lot of speculation in the air over the impact on the Tata group of Noel Tata’s appointment as the chairman of the Tata Trusts by its board of Trustees. Many see him as the successor to Ratan Tata, which he certainly is at the Trusts. But they hold the mistaken belief that he is succeeding Ratan at Tata Sons! And that his appointment at the Trusts will give the Tata group a new thrust and direction. The confusion stems from the role of the Tata Trusts and its relation with the group’s holding company, Tata Sons.
To clear the misconception, the Tata Trusts, a group of Trusts established by the Tata family at various points in time, is a charitable organisation and technically reports to the Charity Commissioner. Or at least it was doing so until recently when it did not want to be classified as a Trust for multiple reasons.
Tata Trusts hold a commanding 66 % of the equity in Tata Sons, which is the holding company of the group and it, in a sense, ‘controls’ the Tata companies. But control has never been the style at Tata Sons, which generally acts as a cohesive and strategic force for the group. Another reason why Tata Sons cannot completely control group companies is because the Tata companies are not total subsidiaries of Tata Sons; they are independent companies and have their own boards of directors. There are also executive councils in these companies which strategise their own growth and operational initiatives. Yes, there is an over-arching strategic plan in place for the group, which Ratan Tata strived hard to put in place. But it is wrong to believe that the group holding company Tata Sons, which N Chandrasekaran heads, is the driver in the seat across all Tata companies.
Against this context, the Tata Trusts are one step further removed from the operations of the various Tata companies. The Trusts are largely involved in funding charitable causes from revenue streams accruing to them from the corpus of the funds bequeathed to them by the founders of the Trusts. They may be its largest shareholder, but they have no direct role to play in running Tata Sons beyond being represented at the board. Chandrasekaran used to consult Ratan Tata on key policy matters, but that was a personal connect.
The point to note however is that until Ratan Tata stepped down from Tata Sons in 2012, the chairman of Tata Sons as well as the Tata Trusts was the same person. It was only after 2012, when Ratan continued as Chairman of the Trusts, and Tata Sons was headed by another individual, Cyrus Mistry, that there emerged a difference of opinion between the Trusts and Tata Sons. Or more accurately, between Ratan and Cyrus. That Ratan, who had presided at Tata Sons as its powerful chairman for over two decades, could oust Cyrus was largely because of the sheer dominance of his personality. But Noel at this juncture, has yet to acquire that gravitas, nor is he a person to push his way through.
Running a mammoth business conglomerate like the Tata group needs a deep knowledge of the linkages and operations of the group’s enterprises. With Noel’s business experience largely confined to the Trent enterprise, it will take him much time to understand the complexities of the group. It still would be difficult for him, even as a majority 66 % shareholder, to put his impress on Tata Sons — which has a very formidable board — the way Ratan Tata did. The turnover of Trent is $ 1.4 billion and the turnover of Tata group is 165 billion. Surely, the tail cannot be expected to wag the dog, can it? Hence it is premature to believe that Noel’s appointment will have a major impact on the Tata group at this point.
