Seldom in recent history has the community, India and the world seen such turbulent developments over the course of 16 days. First on October 24, 2016 the shocking news was announced that Cyrus Mistry, former managing director of the Shapoorji Pallonji (SP) construction group had been "replaced" as chairman of Tata Sons (TS) by the prior chairman Ratan Tata. Then 15 days later the Narendra Modi led Bharatiya Janata Party government at the center dropped a bombshell that Rs 500 and Rs 1,000 notes have been demonetized. And on November 9 (the 8th in the USA), Donald Trump proved a racist, sexist, untruthful and bigoted reality show actor and real estate developer with five bankruptcies to his credit, could become president of the United States of America. And people complain about the caliber of Bombay Parsi Punchayet trustees!
The demonetization hit the community and the country the hardest. People who keep aside Rs 500 or Rs 1,000 for their household expenses found themselves suddenly without cash for basic necessities. Even medication from most chemists or doctors’ fees had to be put on hold. For elderly people to queue outside banks for hours on end is an impossibility. Some of the fitter ones stood for up to three hours at banks, only to be told the cash had run out or had not even arrived. Jehangir Bisney, trustee of the Parsi Zoroastrian Anjuman of Secunderabad and Hyderabad recommends youngsters and anjuman staff assist senior citizens with bank withdrawals.
Pehramnis (gift envelopes containing cash) readied in advance had to be pried open to remove the defunct, higher denomination notes and kept in abeyance till new notes were obtained and if need be, new envelopes written out.
But for the community perhaps the most distressing event was Mistry’s unceremonious ouster, and that too by Ratan. Both men are highly regarded though Ratan is more of a public figure. Both men and their families are associated with philanthropy. They are known for making money honestly and giving sizeable amounts away. After retiring as chairman of TS which holds shares in the group companies, Ratan has invested his monies in several start-ups to assist budding entrepreneurs. It’s a risky investment, but Ratan’s objectives are also philanthropic. Plus he is a bachelor and has no heirs to worry about. Sixty-six percent of TS shares are held by various Tata trusts of which Ratan continues as chairman. He therefore has considerable clout with TS and other Tata companies. People have alleged he wants to hold on to power but, unlike his predecessor J. R. D. Tata, Ratan set an age limit for retirement for Tata directors including himself when he took over the reins. That he is back at the helm has caused some consternation and earned him criticism.
The public is not much concerned with TS. It is primarily a holding company whose shares are held largely by the Tata trusts and the SP family (18.6%). There are no publicly held annual general meetings. The directors on its board are all discreet. Even former Tata directors and influential individuals concerned with the companies refrained from commenting on the ongoing differences (see "Who will head Tatas?" Business, page 29).
On becoming chairman of TS, Mistry gave up his involvement with the management of SP, leaving the conglomerate in the able hands of his elder brother Shapoor. Perhaps one of the only endearing images to appear out of this sad saga was of the two solemn faced brothers leaving the Tata headquarters at Bombay House with Shapoor’s arm around Cyrus’ shoulders. The Pallonji family is close-knit and media shy. This touching, public display of camaraderie is rare. It was a reminder of the toll the dispute was taking on the individuals and families concerned.
Many believe that while Ratan and Cyrus may have had their differences, Ratan should have handled the situation more tactfully, not let it become an unseemly, public spat. If there is one thing both the TS and SP have had in common is their ability to settle disputes out of the public glare. Of course Ratan’s fall out with JRD’s favorites, TS directors Russi Mody of Tata Iron and Steel, Darbari Seth of Tata Chemicals and Ajit Kerkar of Indian Hotels (the Taj Group) made the headlines, but for the most part differences are settled across the table. Why did Ratan, a senior statesman, not opt to do so in this case?
He and Cyrus had served on the TS board for several years and Cyrus took over the reins with Ratan’s blessings. Ratan may have had compelling reasons for the volte face. But criticizing Cyrus’ management of the group companies can be countered by showing that the board of TS and other companies agreed with his policies. Some have opted to retain him as their chairman. The independent directors on the board of Indian Hotels reposed their faith in him and refused to remove him. Men like Keki Dadiseth, former vice chairman of Hindustan Lever, and Nadir Godrej, managing director of Godrej Industries, are not obligated to any one. Even industrialist Nusli Wadia of the Bombay Dyeing group of companies who was close to JRD and also Ratan, favored Cyrus.
In his "confidential" note to the TS directors Cyrus noted that TS’ net worth increased "from approximately Rs 26,000 crores to Rs 42,000 crores," during his four-year tenure. Some believe that Cyrus’ removal was related not so much to performance as to differences over styles of management. Should Ratan have left him alone as did JRD with his successor? Or should he have intervened as he did? As chairman of the trusts that have probably the final say on who chairs TS, Ratan can assert his prerogative. But was it not possible to do so more discreetly? After all, the Tatas are the most respected group of companies in India with the largest market capitalization.
Already the issue has become a case study for some management schools. What lessons can one draw from the imbroglio? We’ll never know unless the people closely involved tell us the story. Right now it remains a tragic enigma.