A Twist in the Tail

Abstract

Abstract Tata empire is a huge conglomerate from salt to software manufacturing, Tata Sons is the holding company of the group with two—thirds of shares held by various Tata family trusts. Mr Shapoorji Pallonji is the second—largest stakeholder in the Tata Group with 18.5% share in Tata Sons making them the largest individual shareholder in the holding company of the Tata empire. When Mr Pallonjis son Cyrus Mistry took over as the CEO of the TATA conglomerate, it was expected the transfer of power would be seamless, little did one anticipate the entire process to be one of chaos, difficulty and clash of ego, vision and generally the way one works. This is a classic case of board room conflicts getting out of hand. The friction started way back in 2014 with Mistry’s solo decision—making style, ignoring the Tata Sons board. Several of Mistry’s business decisions, such as the sale of Indian hotels in overseas and the move to shut down the UK steel operations, which has been highly criticized. During Mistry’s tenure as an executive chairman, dividend income (apart from TCS) declined continuously, but staff costs doubled. Indifference to these issues led to the dissatisfaction of the board thus leading to the ousting of Mr Mistry. This is a perfect case to discuss about corporate governance and leadership transfer and role of corporate laws.