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Tata Chairman Wanted: Must Be a Selfless Capitalist Visionary!

The reason why Cyrus was unsuccessful and Ratan was right!

We are living in a world in which eighty-five individuals have more wealth than the poorest 3.5billion. It is a world in which 99 percent of wealth is owned by less than 1 percent of the population. If this wealth were somehow “redistributed,” divided equally among every human being on the planet, everyone would be a millionaire. It makes you think—maybe Karl Marx was right.

But maybe not. Marx was born in Prussia in 1818. Jamsetji Tata was born in British India twenty-one years later. Both men lived at the height of the nineteenth century’s Industrial Revolution, the ultimate material expression of the capitalism Marx both defined and opposed. Tata, in contrast, embraced capitalism with both arms and was determined to bring its power and benefits to India. Like Marx, he defined it—but he did so in way the German economist could never have imagined.

Jamsetji Tata was certainly an entrepreneurial giant who became one the most successful businessmen of his generation. He built capital and created wealth. But he was also a philosopher whose beliefs were founded on his Parsi Zoroastrian faith. This taught him that he had a spiritual and moral responsibility to use the entrepreneurial skills with which he had been blessed to improve the lives of others. Given his position in time and place, he focused on improving the lives of the people of India. By his death in 1904 at the age of sixty-five, his enterprises had grown into an iconic hotel, the Taj Mahal at Colaba, and the foundation of what would become the great Tata Group of companies. On his deathbed he told his two sons Dorabji and Ratan, “If you cannot make it greater, at least preserve it.”

They and those who followed them made it greater. Jamsetji was a giant among businessmen. He knew he had been given a special gift, and his vision was to use that gift for the betterment of the people of India. His own enrichment and that of his family he regarded as incidental to this, a mere by-product. The sons embodied Jamsetji’s philanthropic vision of capitalist enterprise by creating charitable trusts, which today hold some 66 percent of the equity capital of Tata Sons.

Karl Marx saw the salvation of humanity in the dismantling of capitalism. He believed that all men were equal by right, but that only a global social revolution could bring about the realization of rightful equality by creating a “dictatorship of the proletariat.” Jamsetji shared Marx’s belief in equality, but he saw in his religion a means not of destroying capitalism but of using it to bring the world’s people closer to their rightful state of universal equality.

My own belief is that history has passed judgement on both Karl Marx and Jamsetji Tata. The verdict? Jamsetji got it right.

With this most profound verdict in mind, let us turn our attention to the current dispute between Mr. Ratan Tata and Mr. Cyrus Mistry and the reasons why I feel this struggle will ultimately be good for both the Tata Brand and the legacy of Jamsetji Tata.

Obviously, Ratan now feels passionately that the appointment of Cyrus as chairman of Tata Sons was a mistake. Ratan was not on the selection committee that chose Cyrus, but he could have been had he not deliberately chosen to refrain from joining the committee. In hindsight, he probably regrets that decision. Yet, at the time, he had every reason to believe that Cyrus would serve Tata and the vision of the founder well. After all, he had lived through six years of Cyrus’s membership on the board and was, of course, very familiar with the Pallonji Mistry family. Pallonji had been on the board of Tata Sons for many years until he stepped down a decade ago and Cyrus took his place. Moreover, Noel, Ratan’s half-brother, is married to Aloo, Cyrus’s sister.

So Ratan had every reason to believe that, in Cyrus Mistry, Tata Sons would have a chairman who truly understood the Jamsetji Tata DNA and was himself passionate about improving the lives of the people of India. Cyrus was given plenty of time to demonstrate his true alignment with the vision that Jamsetji passed down to his sons. It seems obvious to me that Ratan felt compelled to remove Cyrus because he had either changed since becoming chairman or, appearances to the contrary notwithstanding, proved to be the wrong choice in the first place.

There is no doubt that Cyrus is a good businessman, but he may have revealed himself an example of “The Peter Principle” in action—the management theory put forth in 1969 by self-described “hierarchiologist” Laurence J. Peter that executives inevitably rise to the level of their incompetence, getting promoted until they fail because they cannot handle the complexities associated with their final promotion. Personally, however, I believe that Ratan, over a period of several years, concluded that Cyrus had lost the vision of Jamsetji, the vision of giving back.

It is understandable that most people make the same mistake as Karl Marx. They assume that capitalism is inherently incompatible with philanthropy. Those associated with the Tata Group should know better, however. It is an enterprise that has thrived on the vision of its founder, a vision of philanthropy as an engine of capitalism, an ethos of doing well by doing good. Moreover, today, the market rewards the high ethical standards that inform and guide the entire Tata Group. They are universally regarded as a safe pair of hands. This is why the market capitalization of TCS is greater than Accenture and Cognizant combined.

To be sure, changes are needed in the way Tata Sons and the Trusts interact with the companies the Trusts control. In my opinion, it is not possible, let alone practical, for one person to be chairman of ten publicly traded companies. Can you imagine if Apple, IBM, and News Corp were all headed by the same chairman?

But Cyrus’s actions since he was removed demonstrate that the decision to remove him was correct. Yes, restructuring the relationship between the Trusts and the operating companies is called for, but the Trusts should have the ultimate authority on how to interpret the vision of Jamsetji Tata, a vision central to this great and unique enterprise. This authority must extend to the decision of who should and should not be directors of the various companies under their control. The Trusts are the guardians of the vision.