Published On : Thu, Oct 27th, 2016

The Cyrus – Tata open war, more alarming than the Family Feud of UP but in both cases it is Old Guard vs New Blood

mistryTwo ‘family’ feuds have hit the nation this week – one was kind of expected and resulted in an anti-climax, the other was totally unexpected and the full repercussions are yet to be known and felt.

The first feud, as we all know, was within the ruling Samajwadi party in India’s largest state UP. ‘Netaji’ has son on one side and brother on the other and it was open warfare between the two in Lucknow. Not surprisingly, but unfortuntely, Mulayam decided to go openly with brother pushing son into a corner from where he is yet to hit back. Next round will definitely be from his side, so it’s a wait and watch situation in UP.

The second sudden flurry of activity and tu-tu-main-main happened in the hitherto most respected and one of the oldest business houses of the country, in fact the world – Tata Sons.

After you remove all the corporate and legal trimmings, this war is also between two generations of Parsees running Tata who are also inter related. Cyrus Mistry is a far removed yet definite relation of Ratan Tata and it cannot be denied that this fact must have finally prevailed in annointing him Chairman of the group some four years ago.( All Tata Chairmen so far have been Parsees).

In a talk show analyzing the happenings in Tata, famous author Gurcharan Das, made a surprisingly naive observation last night.

“When Tatas had the whole Corporate world to choose from, why had they gone with Cyrus in the first place? His lack of experience in handling a big flagship Corporate empire was well known!” Quipped Gurcharan.

It’s the same like asking ” Four years ago, why did Mulayam choose Akhilesh to be CM of UP when he could have chosen anyone else from UP? What experience of governance did he have?”

I beg to put forward a clear fact – both decisions were made on the same assumption and intention. Mulayam thought that in making his elder son C.M. of His state UP, he could continue to be proxy C.M. while indulging in politics in national capital of Delhi too. His writ would still run large as his son had no choice but to do his bidding. Well, it did not quite happen that way because other equations between powerful and power mongers of the state did not quite add up and the resulting alchemy of envy and hate was the undoing of the Yadav Parivar.

Cyrus’ long e mail to the Board that has recently – but not unanimously – ousted him without any prior notice or being given a chance to state his position also alleges exactly the same thing. That Ratan Tata the man ( uncle?) who made him Chairman despite his known reluctance did so because, he as former Chairman had no intention of ‘stepping back’ and handing over charge to new blood. Cyrus now accuses Ratan of going on meddling with Tata’s corporate affairs reducing him to the position of “rubber stamp Chairman” and with other Directors of the company, all venerated old corporate entities, acting as his ‘postmen’.

This second war, that few are taking as seriously as it should be taken, has more dangerous portents for ‘developing’ modern India than the feud in Lucknow. The Lucknow storm will still be blown over because politicians in India have more lives than the proverbial cat with nine lives and they are known for constantly re-inventing themselves in different avatars which the gullible electorate buys blindly.

Because the Tata feud, which is far from over, and Mistry’s e mail show dangerous lack of transperency and ‘personalization’ in taking of important corporate decisions which affected a whole body of share holders – remember the Tatas are NOT majority share holders in most of their companies, these companies real stake holders are its multiple share holders and banks whose exposure to these companies runs in multiple crores. Any negative outcome therefore affects the people of India, the large banks of India and therefore the whole country and the future therefore of entire Corporate India.

If even a single one of Mistry’s serious allegations are true, it will show that important decisions made by Tata Company Boards were not made completely rationally and with safe guarding the bottom line and financial viability of the group. He has cited a number of such examples in Indian Hotels ( Taj group of hotels), Tata Motors ( specially the Nano project) and Tata Steel. According to Cyrus, the resultant financial outcome to the group, could potentially write off their entire reserves and balance situation.

This could be a very bad situation and therefore as a nation we cannot dismiss the Tata situation as a ‘family feud’ or an internal matter of the company which does not affect us at all.

There had to be a reason why Ratan Tata chose to take the PM himself into confidence about his decision to oust Mistry but not Mistry himself. If it did not affect the nation, why tell the PM about it?

Future events and happenings as they unfold will open the whole can of worms but it shows clearly that there is something very wrong in the way our ‘family controlled’ but shareholder owner public limited companies are run.

SEBI , our banks and even our Finance Ministry should study this malaise seriously and nip the rot at an early stage.

Sunita Mudliyar Associate Editor