Opinion
Tata’s next challenge: Leadership void at Trusts
Summary
- With Ratan Tata’s passing, the lack of a clear successor at Tata Trusts raises questions about the conglomerate’s long-term leadership stability.
With the passing of Ratan Naval Tata (1937-2024), chairman emeritus of Tata Sons, many might assume it will be business as usual for the conglomerate. Yet, an unresolved leadership challenge within Tata Trusts may significantly influence the future direction of the Tata Group.
Ratan Tata took over the group from JRD Tata in 1991 and stepped down as chairman of Tata Sons in 2012. Since N. Chandrasekaran, or Chandra as he is known as in business and media circles, assumed the role of the seventh chairman in 2017, he has consolidated group companies, expanded their global footprint, and increased shareholder value multiple times.
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As of March 2024, the Tata Group, with 26 listed companies operating in 100 countries, has an estimated market valuation of $365 billion. Chandra’s leadership over the last few years appears to have secured a near-perfect succession. For now, Tata Sons seems to be in steady hands.
The pressing medium-term issue is: who will lead Tata Trusts? With 66% of Tata Sons owned by Tata Trusts, the trustees exert significant influence over the group. Surprisingly, Ratan Tata did not leave a formal succession plan for Tata Trusts. A few months ago, the Trusts formed an executive committee consisting of Ratan Tata, vice-chairmen Venu Srinivasan and Vijay Singh, and trustee Mehli Mistry. Srinivasan and Mistry were reportedly close to Ratan Tata. The executive committee was established, in part, to streamline decision-making in operational matters. In light of this, appointing a successor to Ratan Tata as chairman of Tata Trusts is now crucial.
Once a new chairman is elected to the Board of Trustees, Chandrasekaran will need to build a strong rapport with the new leader. According to Tata Trusts' latest annual report (2021-22), the Trusts disbursed approximately $113.22 million across 10 verticals, including healthcare, education, sports, and the environment. Although not a substantial amount, this funding highlights Tata Sons' financial support, underscoring the close relationship between the two entities—a relationship that is likely to face challenges in the medium term.
Ratan Tata was the glue that held the group together, and his absence leaves a void. One figure who could play a pivotal role in the group’s future is Venu Srinivasan, chairman emeritus of TVS Motors and a key figure within Tata Trusts, who also sits on the board of Tata Sons.
Ratan Tata stepped down as chairman of Tata Sons in 2012, giving him more than a decade to consider and initiate the process of appointing a successor at Tata Trusts. The recent induction of his nieces into the Trusts may offer a potential clue to his thinking.
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It's unclear why many family business leaders, like Ratan Tata, often hesitate to implement a clear succession plan. While Chandrasekaran’s elevation at Tata Sons was timely, Ratan Tata held back at Tata Trusts. A similar reluctance was seen with Dhirubhai Ambani, whose lack of a will led to a major conflict within the Reliance group. The Board of Trustees at Tata Trusts now needs to act swiftly and appoint a strong leader without delay.
