Tata Sons chairman Natarajan “Chandra” Chandrasekaran has said he will not seek reappointment as the head of arguably India’s most respected business conglomerate that is stretched from humble salt and tea to futuristic automobile technologies and artificial intelligence (AI). 

Only three months ago, the 63-year-old veteran and lifelong Tata employee had announced plans to cut losses in the group’s new businesses. Chandra’s successor has a daunting task ahead, and if there’s anyone whose task is perhaps more daunting, it would be the Tata Trusts that control 66% of the shareholding of Tata Sons, which in turn presides over a clutch of listed and unlisted companies as the holding company. 

The controlling entities need to wake up from their century-old slumber to do a balancing act between the traditional Parsi community values embedded in their goals and the demands of a modern world in which investors demand shareholder value, employees demand empowerment, and customers want accountability.

Implications For Government, Policymakers

All that has implications for the government and policymakers because the current spate of IPOs (initial public offerings) in the stock market suggests a future in which corporate governance has to go beyond the bureaucratic rigmarole of regulatory disclosures, accounting, and procedures towards a robust framework that demands a higher sense of management and a deeper sense of accountability. 

Corporate frauds, stock market scandals, and slothful management in family-controlled listed companies collectively spell a scenario in which the public will demand government accountability even in private corporate matters. Chandra’s exit comes after the recent incident of mid-air turbulence involving a wayward pilot aboard a flight in the Tata-controlled Air India. That turbulence may well be a metaphor for the trouble in the cockpits of the Tata Trusts or Tata Sons. 

Which of these entities must have higher public accountability depends on who you are talking to.

Who Is Accountable?

As the first non-Parsi to have led the group since its founding, Chandra’s entry signalled a culture of purely merit-based professional management at its Bombay House headquarters. Despite its excellence in ethics, innovation, and entrepreneurship, tongues have often wagged about clannish leadership styles in the Tatas, bordering on nepotism. 

The successor who takes Chandra’s place needs to prove that the Tatas are moving onwards, not backwards.

One of the reasons cited for Chandra’s exit is the difference between the Tata Trusts’ chairman Noel Tata and Chandra over the former’s resistance to list Tata Sons under government regulations. For decades, the Tatas have led a big bunch of listed companies through a closed entity that in turn is controlled by a clannish set of philanthropic trusts. This eating-the-cake-and-having-it-too attitude is not easy to nurture in a new world that demands transparency and accountability at various levels. 

As somebody who has up-close watched succession trouble at Infosys, which in a way upstaged Tata entities as a shining example of corporate governance in India, I must say the old-world buddies at the Tata Trusts have to watch their step. Chandra’s explicit statement that he did not fancy the absence of unanimity among decision-makers at the trusts is a pointer: Those who judge corporate governance must be well qualified to justify their action. Chandra’s nine-year reign has been a difficult period, and his track record has still been solid enough for him not to be treated like an employee at a performance review meeting.

Looking Back

A look-back at the Tatas over the past four decades is in order.  

Ratan Tata, Noel’s half-brother and predecessor as the head of the Tata Trusts, did extraordinarily well in balancing the corporate demands of the times and the Parsi trust values, first as Tata Sons’ chairman and later in the trusts. Using the post-1991 economic reforms in India to good effect, he purged the empire of its old satrapic culture in which self-centred CEOs ran companies like private fiefdoms. He then set new-age goals and empowered a matching set of managers. He did not succeed on all fronts, but the acts and messaging were good enough to earn the kind of respect Ratan Tata did – not to speak of the charm he exuded in an elegant mix of soft-spoken humaneness and hard-as-nails decision-making. 

Before Chandra took over, Ratan Tata’s bitter battle with his Tata Sons’ successor Cyrus Mistry involved both leadership styles and old family fault lines. Both gentlemen are no longer alive, but their clash left a challenging question for modern India: what should be the nature and style of corporate governance in an economy increasingly linked to a dynamic world outside?

The Gen Z Challenge

Officially, there is no connection between the recent Jantar Mantar youth protests that led to the exit of Education Minister Dharmendra Pradhan and the corporate challenges at the Tata Group. Sociologically, I would say there is a clear link. You can call it the Gen Z challenge. We now have a restless bunch of investors, employees, and citizens spelling out the demands of a new generation.

For the government, this is an occasion for introspection and road-mapping. If dynastic parties are facing new-age challenges in political democracy, why should shareholder democracy be any different? Is the government prepared to face accountability challenges on behalf of millions of shareholders putting their savings directly or indirectly into shares of listed companies? We are not yet there.

One may cite the safe-harbour-line that says “mutual funds are subject to market risks” in a technical sense. But, in an emerging economy in which corporate governance is still a largely unheard-of term, the government is in effect the custodian of minority shareholders. Policymakers need to inform, encourage, and educate minority shareholders and institutional investors so that today’s IPO boom does not become tomorrow’s bubble. 

Watching corporate succession struggles – and ensuring that they lead to success – may well be added to the To-Do list of the powers that be.

(The writer is a senior journalist covering a diverse range of subjects, including economy, technology, and politics. Views expressed are personal.)