Financial Daily from THE HINDU group of publications
Sunday, Dec 22, 2002
Corporate - People
At the peak: Still not goodbye for Tata
MUMBAI, Dec. 21
AT the city's race course on Wednesday, the arc lights could have been as much on Mr Ratan Tata, Chairman, Tata Group, as on the Indigo.
In December 1988, soon after assuming chairmanship of Tata Engineering, Mr Tata had to tackle the worst labour crisis in the company's history. From there, to car manufacture, rolling out India's first indigenous car in December 1998, following it up with the Indigo in December 2002 and signing up with MG Rover of UK on Friday to export the Indica, it has been a whirlwind trip vindicating both the company and the man who stood by it.
A week from now, on December 28, Mr Tata - Chairman of the Tata Group's main holding company, Tata Sons, since 1991 - may however choose a more relaxed pace, when he surrenders executive powers in tune with group policy that officials relinquish such authority on turning 65.
At Bombay House, the move is not seen to create any waves, being more in the realm of a technical change.
Mr Tata can continue to be Non-executive Chairman of Tata Sons till he is 70 years old. Same goes for the position of Chairman he holds at other Tata companies as well, a group official said. To oversee the conglomerate, a Group Executive Office (GEO) with executive directors was put in place some time back. It is guided by the highest policy forming body of the group, the Corporate Centre, a think-tank that brings together GEO directors and group seniors, including Mr Tata.
The change to Mr Tata's authority was best described by a senior official, likening it to a technical shift from a formal zone to an informal one. "All that is happening on 28th is that he ceases to be Executive Chairman and continues as Non-executive Chairman," he said, citing as example the case of Dr J.J. Irani, who on turning 65 stepped down as Managing Director, Tata Steel, continues to be a Non-executive Director of Tata Sons and is Chairman of Tata Teleservices.
A common response across the group was that the late J.R.D. Tata was Non-executive Chairman for many years. "So, it makes no difference," one official said.
Thus December 28 does not by itself raise the spectre of a succession plan at Bombay House. There is time till December 2007, when Mr Tata turns 70. The way insiders see it: Mr Tata's chairmanship is founded on grounds much stronger than his retention of executive authority. Taking over a collection of companies, some of them ruled by longstanding helmsmen who had fashioned these companies into personal fiefdoms, Mr Tata's central achievement was putting the glue back into the group.
The promoter's stake in key Tata companies was increased and membership to the group was based on codes of functioning and adherence to brand values. In the process, much-needed focus, clarity and youth came to be imparted, the latter a slow transition for the Tatas. Along the way, the group made solid advances with its old economy companies - Tata Steel's new cold rolled mill, Tata Engineering's foray into cars and Tata Tea's acquisition of the UK-based Tetley.
Exits occurred, from the erstwhile Tata Oil Mills Company, Lakme and ACC. Slip-ups too happened, most publicised being the still unravelling mess at Tata Finance. But further on the upside, the Tatas are now a leading player in telecom with VSNL and Tata Teleservices, while infotech major Tata Consultancy Services is touted as a significant unlocking of value due in the near future. Simply put, Mr Ratan Tata has a track record that fetches respect with or without executive powers.
Though he joined the Tatas in 1962, it was his appointment in October 1981 as Chairman, Tata Industries - the group's holding company for new businesses - that pushed Mr Ratan Tata centrestage. As he took over that post from J.R.D, he was seen to be a successor in the making. Coming Saturday, nothing like that is due at Tata Industries, if chairmanship there were indeed the accepted route to eventual succession at Tata Sons.
On the other hand, changes in management structure at the group's apex - essentially the Corporate Centre and GEO - could be interpreted as preparing the Tatas for a time when its original family promoters are not so closely associated with the operations of the group, as at present. Have the Tatas then, adopted a structure, which can run without a Tata at the helm? There is no answer to this either. "It shows the extreme professionalism of the group at the highest level," was all what one top official would say.
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