Company Outsider: Glaring contrast between the actions of Tata Sons and Kohl Corp over governance lapses
Summary
Kohl Corp recently fired its CEO, Ashley Buchanan, just four months into his job, for a breach of its code of ethics. However, Tata Sons, the holding company of India’s most respected conglomerate, has taken a somewhat different view on a similar issue of corporate behaviour by a senior executive.
Kohl Corp isn’t a company we are very familiar with. The American departmental chain has been struggling financially in the face of the changing retail landscape in the US. But its recent decision to fire its CEO, Ashley Buchanan, just four months into his job, for a breach of its code of ethics, deserves attention.
That’s because at the same time in India, Tata Sons, the holding company of the country’s most respected conglomerate, has taken a somewhat different view on a similar issue of corporate behaviour by a senior executive. That view seems to go against the spirit of the storied group’s laid-down policy on conflict of interest, and contradicts its recent action against other executives as well as the example set by Ratan Tata in forcing Cyrus Mistry out as chairman of the group in October 2016.
Last month, Mint reported that Divinion Advisory Services, a company started in 2022 by the daughter and wife of Suprakash Mukhopadhyay, group company secretary of Tata Sons, and run by retired Tata executives, was briefly listed as a Tata Group company. Tata Pension Management, which is connected to Mukhopadhyay through another Tata firm, included Divinion on its group company list in 2022, though the mention was taken off the following year with the company claiming it was an error on its part. In response to the charges, Tata Sons immediately instituted an internal enquiry which eventually found Mukhopadhyay in breach of disclosure norms, but pronounced him not guilty.
Also read: Tata Sons concludes probe into a top executive. Here’s the verdict
At Kohl, the CEO’s offence was indefensible and his sacking came as no surprise after investigations revealed that he had directed millions of dollars in business, under "highly unusual terms", to a company run by a woman with whom he had an undisclosed romantic relationship over the previous 10 years. Buchanan had failed to disclose this personal connection, thus violating the company's code of ethics.
The process the US company adopted to handle the matter contrasts with how Tata Sons seems to have gone about its task of investigating Mukhopadhyay’s actions. Buchanan’s termination came after an external investigation overseen by the board’s audit committee. At the conclusion of the enquiry, the company announced the rationale for its decision transparently, issuing a press statement stating that the CEO had violated company policies by directing it to engage in vendor transactions that involved undisclosed conflicts of interest.
Tata Sons chose a three-member internal committee to go into the charges. The committee in its report, which is now with the group chairman N. Chndrasekaran, spelt out clear lapses - Mukhopadhyay had failed to make the requisite disclosures about the firm run by his family, and about his role in soliciting other Tata executives including those he had some influence over, and finally about transactions like a corporate social responsibility (CSR) grant from Tata Investment to the Divinion Trust. Despite this, the committee concluded that he was not guilty because there was no “intentional breach of Tata Code of Conduct or mala fide intent on his part to make a personal gain."
In 2023, Tata Consultancy Services (TCS) sacked six employees in a recruitment bribery case while Tata Steel also fired a total of 35 people for breaching its code of conduct. Perceived conflict of interest was also a major factor in the sacking of Mistry as group chairman. In September 2013, Ratan Tata wrote a three-page letter to Mistry expressing his deep concern about Tata companies giving business to Mistry family businesses, of which Cyrus was a 50% beneficial owner. “There appeared to be a conflict of interest, which Tata Sons could not allow", Tata wrote.
Clearly, the Tata code of conduct leaves little scope for ambiguity. Mukhopadhyay, as a 35-year veteran of the group, would be well aware of those guardrails. Despite that, he chose to help a business run by members of his family in his official capacity. That doesn’t add up to the committee’s conclusion that “there does not appear to be any intentional breach of Tata Code of Conduct" even if one accepts that there was no “intent on his part to make a personal gain by compromising the interests of his employer entity (Tata Sons) or of the relevant Tata Group entities".
As chairman, Chandrasekaran still has the opportunity to take a more exemplary stance on the matter and ensure that the group’s well-earned reputation for ethical behaviour isn’t compromised. Even if he decides to go against the committee’s recommendations, it still begs the question of why a group of senior Tata Sons executives - Nupur Mallick, the head of human resources, Eruch N. Kapadia, chief financial officer, and Sidharth Sharma, general counsel - thought otherwise.
