The committee asked Cyrus Mistry to become a candidate. At first he refused. A little later when the search still came up short, Mistry was sounded again. He consulted his father, Pallonji Mistry, and others in the family and ‘reluctantly’ entered the race. The forty- four-year-old dropped out of the selection committee and served himself up for assessment. In October 2010, he was fielding questions from the selection committee like any candidate would.
In Mumbai parlance, Mistry was a true ‘townie’. He went to the prestigious Cathedral and John Connon School in South Mumbai. He was known to be less flamboyant than his brother but close to his ‘group of boys’, recall friends and family. He went on to his bachelor’s in civil engineering at Imperial College, London, and a master’s in management at the London Business School.
At twenty-three, Mistry joined the family construction business. Three years later, in 1994, he became the MD of Shapoorji Pallonji’s flagship construction company. Mistry extended his company’s product portfolio from construction to design and delivery of residential projects as well as projects in specialised sectors such as oil and railways. He also expanded his business internationally. In Cyrus Mistry’s words, ‘Shapoorji Pallonji is a company I have built bit by bit. Most of the people there have been part of a team, many of whom have worked with me for over twenty years. I would like to think I built a company that has world-class capability.’
In October 2010, Mistry requested the selection committee to excuse him from a meeting due to health reasons and instead answered on email the committee’s questions on his vision and understanding of the Group.
Mistry had a larger vision for the Group. He wrote that the chairman of such a big group should have at least six years to effect change. He added it was time the articles of association or founding principles of Tata operating companies were modified to give Tata Sons rights to nominate a third of the board of directors of each operating company as long as Tata Sons held over 26 per cent in the operating company.Till such time,each company should have at least two directors from Tata Sons to ensure control of Tata Sons over its operational arms.
He also envisioned that over the span of the next five years the Group must incubate at least four major businesses, which would potentially be spun off into new companies. ‘I believe the Tata Trusts can play a very important role here (managing the expanse and diversity of the Group), but it has to be well synchronized with the Group requirements,’ wrote Mistry.
The meshing of young enterprise with wisdom of the old guard seemed to be an important theme running through all that he proposed. As a board member of Tata Sons, many had observed Ratan Tata turning to him for counsel.
Mistry seemed to tick all the right boxes. He was an entrepreneur. He was familiar with the Group, being a board member of Tata Sons. He had skin in the game with a financial stake of 18 per cent in Tata Sons that his family held. He was related to the Tata family, albeit indirectly – Cyrus’s sister was married to Noel Tata. And as quoted in a New York Times report: ‘He had a good relationship with Ratan Tata which was always seen as an important qualification for the job.’
Shirin K Bharucha, who was representing the Tata Trusts on the selection committee, said in a television interview that Mistry was most qualified to ‘grow into the role’. Mistry was the man who would further the philanthropic mission through the Tata Trusts.
Still, his appointment came as a big surprise to many.
The naysayers made all kinds of gloomy predictions. Some said that the Shapoorji business mindset would never fit into the Tata culture – which focused on diversity, people and philanthropy. Some predicted that he would pale before the grandeur of Ratan Tata. Many dismissed his single-company experience saying his vision would be myopic for the vastly diversified Group. His personal interests, some said, would come before the Group’s well-being, and that the move favoured the Mistrys, who had long been rumoured to want control over the Tata Group. Perhaps these were just the lashings of aspiring contenders for the golden ticket whose hopes had been dashed. Yet, intentionally or unwittingly, these rantings sowed the seeds of doubt, as the events that unfolded subsequently suggest.
The division among Mistry’s supporters and detractors was reminiscent of the time when Ratan Tata had himself taken over more than two decades ago. He often recalled the day in March 1991 when JRD Tata returned from the hospital after undergoing a heart-related procedure, and offered Ratan the bigger chair in the fourth-floor boardroom. Ratan Tata became chairman later that year.
When JRD asked Ratan Tata if he should vacate his office, he urged JRD to retain it. He said, ‘I did have some concerns that Jeh would be in office every day, that he would interfere and that he would forget that he was not any longer the chairman, that he would be irritable and render somewhat impotent the moves that I was hoping to make.’
Yet, Ratan Tata’s challenge did not come from JRD. Instead, it came from Russi Mody, the long-time lieutenant of JRD Tata and chairman and MD of TISCO, now Tata Steel.
Mody had claimed chairmanship and had even spoken to the press of his candidature. Thereafter, when he did not get the post, he spoke in public about the ‘mismanagement’ in the company at the hands of Ratan Tata.
Ajit Kerkar, the chairman and managing director of India Hotels Company Limited (IHCL) was another heavyweight who opposed Ratan Tata’s idea of a centralised Group. Ratan had envisaged the Tata brand as bigger than any of its operating companies and decided that a brand charge be paid by all Group companies to Tata Sons for using the brand name.
The operating companies at that time were often run by the individual chiefs as their own fiefdoms. Neither the company names, nor the brands they operated made it obvious they were part of the Tata Group. Kerkar was one such chieftain. He declared that IHCL that operated the Taj chain of hotels did not use the Tata brand name and refused to pay the charge. He questioned Ratan Tata’s move as being detrimental to shareholders.
Tata negotiated these challenges to his authority with firmness. In a boardroom battle, Kerkar was forced out of his company, completing the purge of the old guard.
Under Ratan Tata, the Tata Group became a global brand. All companies under it benefited from the values of ‘trust’ and ‘fairness’ associated with the mother ship. Taking on challenges that no one thought possible had become his signature. In his two decades at the helm, Tata Steel made the large acquisition of Corus, the ailing European steel conglomerate, and Tata Motors acquired Jaguar, the world-renowned luxury car brand. Ratan Tata had conceived of manufacturing a car that every scooter-riding Indian would be able to afford – the Nano, for just Rs 1 lakh, a mere $2,000. Under Ratan Tata’s leadership, Group revenues grew over 46 times to $83 billion, profits grew 51 times and market value 33 times.
Tata saw a similar future for Mistry and decided to make Mistry’s rite of passage easier than his own had been. Therefore, Ratan Tata’s glowing testimonial and endorsement of Mistry’s candidature bore special significance.
In the November 2011 announcement naming Mistry as his successor Tata said, ‘He has been on the board of Tata Sons since August 2006 and I have been impressed with the quality and calibre of his participation, his astute observations and his humility. He is intelligent and qualified to take on the responsibility being offered and I will be committed to working with him over the next year to give him the exposure, the involvement and the operating experience to equip him to undertake the full responsibility of the Group on my retirement [in 2012].’
So began a one-year-long handover process with Ratan Tata as the master and Mistry as his apprentice. At several forums Ratan Tata endorsed Mistry to the staff and stakeholders of the Tata Group as Mistry accompanied him to get a handle on the Group’s varied businesses.
Ratan Tata wrote in a letter to Group employees: ‘The Tata Group will undoubtedly play an important role in the continued development of our country, providing leadership in various industrial segments in which they operate and living by the value systems and ethical standards on which our Group was founded. The future growth of the Group will be led in the coming years by Cyrus Mistry.’
His advice to Mistry was, ‘Be your own man. Be yourself and just be driven by the fact that every act you do and every move you make has to stand the test of public scrutiny.’
A year went by all too quickly and soon it was 11 am on 18 December 2012 – the day of Ratan Tata’s last board meeting as chairman of the Group. Paying tribute to Ratan Tata, Cyrus Mistry said: ‘The past year has been a great learning experience under the direct guidance of Mr Ratan Tata. The Tata Group is founded on strict values. We will face ups and downs, whatever may lie in our path. We are ready to face all the challenges that will come our way.’
Ratan Tata also offered his last words of advice as the chairman: ‘How you deal with an aberration is a test of what you stand for rather than sweeping it under the carpet.’ He expressed his availability for any advice that Mistry or other Group leaders would seek, but said he ‘would like to make a clean break’.
The meeting ended and Mistry’s watch began.
Excerpted with permission from Tata vs Mistry: The Battle for India’s Greatest Business Empire, Deepali Gupta, Juggernaut Books.