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Best long-term solution is for Mistry family to exit Tata Sons, says Peter Casey




A third party who shares the philanthropic values of Tata should buyout Mistry’s stake

Peter Casey’s book, Tata – The World’s Greatest Company, was released in 2014 and is now in its second reprint. In an email interaction with Ashish Rukhaiyar, he says that the ongoing Tata-Mistry feud will not impact the Tatas, who should look at buying out Mistry's stake and get a shareholder like Warren Buffett or the Bill & Melinda Gates Foundation that shares the philanthropic values of the Tatas. Edited excerpts:

While working on your book, you must have followed the Tata Group and its culture quite closely. Did you expect that such an incident could ever occur in a Tata boardroom?

I was much more surprised by the five-page letter written by Cyrus Mistry than I was by the Board’s decision to remove Cyrus. To understand the depth of the issues you have to go back over 160 years and understand the deep relationships that existed between Framroze Edulji Dinshaw, his father and Jamshedji Tata and his sons Ratan and Dorabji Tata. Both families were deeply passionate about improving the lives of the people in India. The Dinshaws and the Tatas were a good team. Dinshaws helped fund many of the Tata endeavours and in return they were paid a share of the profits.

Both families have very long term visions of how to improve the lives of the people in India. Both were passionate about improving education and giving back through philanthropic means.

When Dinshaw died, his family decided to sell the debt that had been loaned to Tatas into equity and Pallonji Mistry stepped in and bought the debt, but there was always an understanding that the fundamental values of the Dinshaw and Tata founders would be adhered to. I believe that initially Cyrus had convinced Mr. Ratan Tata that he would continue the long tradition embodied in the Tata custom of giving back to society.

I believe that Mr. Tata, after watching Cyrus perform for four years, decided that he did not share the values of Jamshedji, the previous Chairmen and indeed the Dinshaws.

My personal belief is that Mr. Tata became convinced, over time, that Cyrus was not truly aligned with the long term vision of the founders. So, no, I was not surprised.

Do you think 'saving the legacy and the family name' was an important element behind the sudden ouster of Mr. Mistry?

The Tata business model, whereby companies give back to society is a model that should be encouraged. Personally, as he demonstrated in his letter, Cyrus is more concerned about his reputation than Mr. Tata is about his. Mr. Tata has earned his reputation over almost eight decades.

Do you think that high profile business families have to also think about 'how history will judge us' and so sometimes take decisions that might save the family name but compromise the business profitability a bit?

I think you should ask Cyrus that question. For decades, Mr. Tata has demonstrated that he is always concerned about doing the right thing, even if it has a negative impact on his reputation. You may recall he took very tough, unpopular decisions when he first took over as chairman. The Tata legacy has been around for 150 years and I am confident it will be around in another 150 years. Personally I doubt if the Mistry legacy will last 150 years.

Has this episode done an irreparable damage to brand Tata, which was hitherto seen above the other corporate families in terms of values, ethos and corporate governance?

Complete reverse. I believe that this episode will show not just India but indeed the world that there is a different way to do business and that it does not always have to be about the bottom line. It does not have to always be about winners and losers. I believe that this unfortunate episode will actually be to the long term benefit of the Tata legacy as it will serve to remind people what a special company Tata is.

What, according to you, is the best manner to resolve this matter now it has reached a level where well-known lawyers have got involved and caveats have been filed in judicial bodies?

The Mistrys took a gamble when they bought the shares from Dinshaw. Every investment has its risks. They have had good returns over the years. I think that the best long-term solution is for the Mistry family to exit Tata Sons.

They have been in an unhappy marriage for 80 years and like all unhappy marriages it is probably best to come to as amicable a divorce as possible, for the benefit for the children. I believe that one option could be for Tata Sons to perhaps consider buying them out over the next forty years.

Pay them a small interest dividend and, using the valuations outlined in Cyrus’ letter, agree on a valuation and work out a long-term buy out or get a third party, who shares the philanthropic values of Tata to buy out the Mistry stake.

Perhaps someone like Warren Buffett or the Bill & Melinda Gates Foundation.