Tata Trusts succession planning: In the right direction

Noel Tata has had long years of experience of managing Tata group companies, and his way of functioning will complement N Chandrasekaran's. (Illustration: Suneesh Kalarickal)

Two recent news reports of developments in the Tata Group merit closer attention. One, the board of Tata Sons gave the go-ahead to bifurcate the post of Tata Sons chairman and that of Tata Trusts and extended the tenure of Tata Sons chairman N. Chandrasekaran by another five years. Two, Ratan Tata’s half-brother, Noel Tata (65) who recently retired from the Tata group was inducted as a trustee in Sir Dorabjee Tata Trust and Allied Trusts. This also potentially opens up the possibility of Noel Tata being inducted on to the board of Tata Sons.

Both these are significant moves in succession planning at the $ 113 billion Tata Group. If the induction of Noel Tata as a trustee is taken to its logical conclusion of him helming Tata Trusts, it will ensure continuity of a Tata family member in the leadership of the entire Tata Group as 66 percent of the holding company Tata Sons is held by Tata Trusts. The decoupling of the chairman’s posts at Tata Trusts and Tata Sons is a decision that is well-thought out and one that will protect the interests of all the stakeholders. It is corporate governance at its best because it will ensure that too much power will not rest with one person.

Relatedly, the bitter experience of Cyrus Mistry heading Tata Sons a few years is still perhaps etched in the collective Tata memory. Ratan Tata, was the last person who held the position of chairman of both Tata Sons and Tata Trusts till he stepped down as chairman of Tata Sons in 2012.

What does succession planning in family enterprises mean and how should it be done?

The chosen successor should have great clarity of trusteeship values that are embedded in the enterprises of the group. If a family member is chosen, he will be able to carry forward the values of the business family. The Tata Group has a high reputation for ethical business, social consciousness and compassionate capitalism right since its inception in 1892.

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In this regard, JRD Tata had said, “That the great projects he (Jamsetji Tata) carried through were successful is less important than the motives with which they were launched, than also the sense of social consciousness and trusteeship which Jamshetji inculcated in his two sons and my father, R.D. Tata and which have continued to this day, to inspire and guide his successors, and through them, the management of various enterprises which they promoted” (The Creation of Wealth by RM Lala) . .

Succession planning also has to have a critical element of grooming. Institutions require well-planned succession as otherwise they will crumble and fall. Finally, creating dual posts will go a long way in ring-fencing the trusts to ensure that there is no misuse of powers at Tata Sons.

The other important aspect to keep in mind is that leadership of a trust and that of a business requires different skill-sets. The personality and leadership traits of N. Chandrasekaran and Noel Tata seem to be a good blend and balance in this respect. An additional benefit is that Noel Tata has had long years of experience of managing Tata group companies like Trent and Tata International.

All of the above are spot on time for the entire Tata Group with Ratan Tata at 84 years. Noel Tata’s induction into the Tata Trusts is a clear indication that the rich legacy of the nearly 125-year old Tata Group will continue.