Seasoned Bombay House watchers offer illuminating pictures of how the Tatas handled the Corus acquisition (under Ratan Tata) in contrast to the messy divorce from DoCoMo (under Cyrus Mistry) to underscore the change in management styles and perhaps explain Mistry's abrupt dismissal.
Reuters
A top investment banker recalled that Credit Suisse had offered Tatas a financing package that helped it aggressively outbid its Brazilian rival for Corus Steel in the UK. Once the deal was done, two other MNC banks approached the company's top brass with a more comfortable funding plan involving cost savings of about $400 million.
As Tata Steel weighed in favour of the new funding option, Credit Suisse fetched up with a letter from the Tatas showing its commitment to $120 million in fees whether or not the financing was availed from it.
Bombay House top brass was left fuming that a bank had the temerity to place a demand on them. But when the matter was taken up to the then group chairman Ratan Tata, his decision was simple: There was a commitment made to Credit Suisse which must be honoured. Having paid the European bank, Tata Steel went ahead with the cheaper financing option.
Reuters
Almost a decade later, Tata is telling DoCoMo, the Japanese partner in the troubled telecom business, that it would honour a put option to buy out at a pre-determined price but with a caveat.
It would have to comply with Indian regulations. It's a small tweak to the much storied magnanimity and commitment of the Tatas. DoCoMo has already won the arbitration and blamed Tata's adamant stance for not resolving the dispute. (RBI had rejected Tata's proposal to pay a price which is higher than the 'fair value' to buy out its Japanese partner's stake after the finance ministry told the central bank to 'stick to the rules', leaving the issue to be resolved through arbitration).
"For a nuanced Tata watcher, this was a big change. In the past, Tatas would have told a battery of lawyers that there's a commitment and they must find a way around the problem," says the person quoted above. "The philosophy out there was that we would be fine in the long run," he adds, while explaining how this has served the group well over time. "What is the Tata Group? A string of under performing companies, if you exclude TCS and JLR, but strutting around because of the value system it firmly holds," says a person who has worked with the Bombay House extensively.
Also, there were indications that the group was getting preoccupied with decimal points, with a newfound eagerness to gather the last rupee. This was a mindset shift which roiled the Japanese ally and stymied other divestment plans aimed at de-leveraging the group's nearly $25-billion debt, says the banker mentioned earlier.
It also surprised some insiders, including the Trusts that control Tata Sons, the holding company of the diversified salt-to-software behemoth. The Trusts started taking a keen interest in Mistry's new book-keeping ways.
Reuters
Not just that. The handling of a harassment case at a group company, involving a senior functionary, led to considerable consternation among old-timers who were left fretting at the ways Tata was changing. The complainant had approached the chairman before quitting the job in disquiet. "The message from the top to a distraught employee didn't befit the group or the post," says the second person, cited earlier, with access to the group.
With the Tata Trusts turning their attention to the recent developments, strategic decisions across group companies were being elevated to the Tata Sons board. This reduced the space to maneuver for Mistry.
Also Read:?'Intolerance Is A Curse We Are Seeing Of Late,' Says A Concerned Ratan Tata
Some observers believe the trusts weren't fully in sync with the functioning of the Group Executive Council set up by Mistry, which worked closely with the boards, CEOs and senior management of Tata companies.
There was strong criticism of GEC members Madhu Kannan, Nirmalya Kumar, and N S Rajan who now face an uncertain future. The Trusts, which have majority voting rights in Tata Sons' board, had started assessing the changed management style and its impact on the group which is facing sluggish growth.
These developments came to the forefront even as Mistry entered his fifth year as chairman and was due for, most thought, a routine renewal.
Mistry, who spearheaded Shapoorji Pallonji Group before taking over the mantle at the Tata Group, was perceived to be attempting to secure his position by building strong ties with the country's political establishment. Some of his GEC appointees reportedly advised Mistry that as Tata chairman he had an opportunity to play a bigger role with the establishment at a time when the credibility of most business houses stood diminished.
Reuters
Mistry had a different management perspective and perhaps needed time to evolve. His backers saw in him a chairman who struggled with a difficult global economy and some unwieldy acquisitions he inherited.
Mistry, only the second group chairman not to have a Tata surname, was initially part of selection committee searching for Ratan Tata's successor. He so impressed fellow committee members during deliberations ¡ª detailing what a future Tata chairman should be like ¡ª that they actually gave him the job. In the end, it didn't quite work out.
"Ratan Tata is a big picture man, a visionary. Mistry brims with energy and is very hands-on (for a Tata chairman). The change was very 'in- your-face' for the old-guard," one of the senior-most CEOs at the group said. He had to go.