Companies

Mistry exit: industry shocked; critics think it’s a regressive move

Murali Gopalan Mumbai | Updated on January 16, 2018

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Cyrus Mistry would have completed four years as Chairman of the Tata Group in December. His abrupt ouster has sent shock waves across industry circles here simply because it was completely unexpected.

In a way, it was as surprising as his elevation to the top slot in December 2012, when the entire process of selecting a successor to his charismatic predecessor was shrouded in secrecy. Today, Ratan Tata is back in the saddle, albeit temporarily, while the hunt for a replacement will start all over again.

For a group that still cherishes old world values, Monday’s terse press release from Tata Sons was a bolt out of the blue. “We hardly expected something like this. He (Mistry) has hardly begun to settle down,” said a senior industry executive, who did not wish to be named.

What Mistry brought to the table was the energy of youth and the promise of change. After all, he was barely in his mid-40s when he took charge. Sure, he was stepping into the massive shoes of Ratan Tata, who, during his 20-year tenure, had transformed the group into a $100 billion conglomerate, a jump of nearly 50 times.

High expectations

Comparisons were inevitable and people were aware that he faced a gargantuan task given the size of the empire he was inheriting. But there were high expectations that he would deliver results.

The Bombay House grapevine suggests this is precisely what did not happen. “Not everyone was happy about selling the steel business in the UK. Likewise, the legal tussle with DoCoMo needlessly put the fiercely private Tata Group in the spotlight. This was unwelcome attention,” says a source.

But then, it could always be argued that the Corus deal was a costly mistake and Mistry was inheriting a huge liability. From what insiders say, the issue finally boiled down to delivering results. “Most group companies have not been doing too well and there have been tremendous bottomline pressures,” adds the source. Perhaps, this triggered the decision to look for a new Chairman.

A combination of factors?

Old timers will recall how Ratan Tata had his own share of challenges to deal with when he took over as Chairman. There were coteries within the group that had to be dismantled. Here was a young man who was taking on the old guard and, even as he faced his share of bad press, eventually stamped his authority within the group.

Did Mistry, therefore, deserve more time instead of this abrupt decision to have him replaced? Typically, this cannot be the outcome of just one issue, such as the steel business sale or the DoCoMo controversy, but a combination of factors. It also cannot be denied that the Group was affected in a scenario of tremendous economic volatility across the world.

What adds to the intrigue is that very few people really knew Mistry. Those who had interacted with him found him caring and friendly. A Tata Motors executive still recalls his “unassuming manner” as Chairman, which left him quite impressed.

Young advisors

Mistry also had a pool of young advisors, who were drawn from various disciplines to contribute ideas that would energise the Group. It remains to be seen if this structure will continue without him.

Immediately, however, the group, which is fiercely guarded about its privacy, will have to endure some unwanted scrutiny.

Across the world, Mistry’s exit will be debated and speculation will be rife on all the likely causes.

Within industry circles, there are critics who think it is a regressive move. “Young blood has not been given enough time to deliver. Bringing back a 79-year-old man is hardly the right message from a group like the Tatas,” says a former public sector official.

Of course, Ratan Tata is going to be around for barely four months. Remember the drama that followed during the months when he decided to step down in 2011? Perhaps, things will be more muted this time around, but the mystery surrounding Mistry’s exit will continue.

Published on October 24, 2016

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