Ratan Tata: The Successor Search Is On

Ratan Tata appears serious about keeping his date with retirement. Tata Sons, the promoter of the $71 billion Tata Group, has formally set the ball rolling to find a successor to its present chairman, who will retire in December 2012, when he turns 75.

By Reeba Zachariah, TNN

A Tata Sons statement said its nine-member board has formed a selection committee comprising five members, including an external member, "to decide on a suitable successor". The committee would look at candidates both within the organisation and outside. It is expected that the final selection would be made in "adequate time to effect a smooth transition and change of leadership" before Tata hangs up his boots.

The statement added that the panel is in the process of formulating criteria "for identifying the most suitable candidate taking into account the global nature and complexity of the group’s business."

Group sources that TOI spoke to confirmed that R K Krishna Kumar, non-executive director of Tata Sons and a confidante of Tata, and Noshir Soonawala, group advisor, are on the panel. Significantly, Tata himself is not the panel. The name of the external member could not be immediately ascertained. Some said that the outsider could be one with an international background — triggering speculation that it could be US-based management guru Ram Charan, corporate strategist and Planning Commission member Arun Maira or Amar Bose of the eponymous Bose Speakers.

Interestingly, the development comes within days of Ratan’s half-brother Noel Tata being given an enhanced role in the group. Noel was elevated to vice-chairman of Trent — the group’s retail company which he has steered for 12 years as MD —- and anointed managing director of engineering-to-leather goods maker Tata International.

His is a name that has stayed in steady circulation through the ebb and tide of speculation around India Inc’s most closely-followed succession. Noel’s candidature is seen to be fortified by the fact that he is also the son-in-law of Pallonji Mistry, the single largest shareholder (18%) in Tata Sons, the holding company for the group.

Over the years, names such as Arun Sarin, formerly of Vodafone, Indra Nooyi of Pepsi, Keki Dadiseth of Unilever and Carlos Ghosn of Renault have figured in the sweepstakes. The one attribute they all have in common is their global experience.

The setting up of a search committee for the chairman’s post — the first such in the group — is in line with Ratan Tata’s vision of transforming the group from a patriarchal concern to an institutional enterprise. Incidentally, it is Tata who was the driving force behind the group’s retirement policies. Till his showdowns with chieftains such as Russi Mody and Ajit Kerkar — who had run their companies like fiefdoms under J R D Tata —- the group had no stated retirement age for its top executives.

"The group would require someone with experience and exposure to direct its growth amidst the challenges of the global economy," the statement said. The brief given to the panel is apt, given that the Tata group has expanded its global footprint dramatically via several overseas acquisitions, such as Corus for $13 bn, of Jaguar Land Rover for $2.3 bn and General Chemicals for $1 bn.

Though Ratan Tata appears to be on course to relinquish his position as group chairman within two years, he could continue as chairman of Sir Dorabji Tata Trust and Sir Ratan Tata Trust — the two charitable trusts that hold a major stake in Tata Sons — a position his predecessor JRD Tata held till his death.

If the committee selects a non-Parsi to lead the group, it would be a first in the 140-year history of the salt-to-steel-to-software conglomerate. The only non-Tata person to be chairman of the group was Nowroji Saklatvala in 1932.

When Ratan Tata took over as the group’s fifth chairman in 1991, the group’s revenues were Rs 8,553 crore. This has since grown over 40-fold to Rs 3.46 lakh crore in 2008-09, with about 65% of its earnings coming from overseas. When JRD Tata named his successor in Ratan Tata, it took everyone by surprise. Legend has it that Nani Palkhivala was the frontrunner for the chairmanship, but the renowned jurist lost out as he was a strong critic of the government, which JRD Tata felt could go against the interests of the Tata group.

Ratan Tata had earlier hinted that there were also contenders outside the group to succeed him. "Whoever it might be, I hope I can pick the right person who will surprise everybody," Tata was quoted as saying in an international media report. Apart from Ratan Tata and Krishna Kumar, other members on the board of Tata Sons include Farrokh K Kavarana, Jamshed J Irani, R Gopalakrishnan, Ishaat Hussain, Arunkumar Gandhi and Cyrus Pallonji Mistry, brother-in-law of Noel Tata.