“Deprived of the right to decide what and how much to produce, what prices to charge, how much to borrow, what shares to issue and at what price, what wages and bonus to pay, what executives to employ and what salaries to pay them, the directors and top management from the chairman down have hardly any economic power. Taking my own case, I doubt that there is anywhere in the world, outside India, any industrial executive in charge of a major enterprise with less real power than I have…”

This was JRD Tata, the storied chairman of Tata Sons, during his speech at the annual general meeting of Tata Steel on August 24, 1972.

Some 44 years later, another Tata Sons chairman, Cyrus Mistry, too, lamented being reduced to the status of a lame duck.

While JRD was railing against the Indira Gandhi brand of socialism that emasculated private enterprise, Mistry’s lack of executive powers in a vastly different economic landscape is the result of a corroded structure that passes for capitalism in India today.

Back then, an overbearing state could render the chairman of a large conglomerate such as Tata Sons useless with its maze of regulations and control. Now, Ratan Tata, Mistry’s predecessor, and directors of the board beholden to him have done the job as effectively.

Legacy lure

Speaking of England (a country with which the Tatas have more than just business links), the French philosopher Voltaire remarked that the English thought it a good thing to kill an admiral from time to time in order to encourage others. In the case of the Tata Sons boardroom, Ratan Tata may have thrown Mistry under the brand new Tata Star City bus not so much to encourage others but to embalm a rotten legacy the 78-year-old himself left behind less than five years ago.

Legacy building is troublesome business, yet seductive. Monarchs, autocrats, presidents and prime ministers love it. Can businessmen be far behind?

Ratan Tata’s predecessor JRD remained the chairman of Tata Sons for more than 50 years, beginning his stint just before World War II and relinquishing control in 1991, when India had barely begun the process of economic liberalisation.

JRD’s legacy – shaped both by his longevity and the odds he faced in a newly independent, socialist nation – was virtually impossible to live up to. To understand the relative freedom he enjoyed, and the changes he had to face, consider this: Tata Sons was the managing agent of the scores of Tata companies. It was duty-bound to nurture back to profitability companies that were in loss, using profits from a healthy group enterprise. It was not uncommon for a managing agent (read Tata Sons chairman) to pledge his personal wealth to keep a group firm in business, as Sir Dorabji Tata did to pay the employees of Tata Steel.

According to JRD Tata’s authorised biography Beyond The Last Blue Mountain, written by Russi M Lala, under the managing agency system, JRD ruled an empire, carrying the glory and burden on his shoulders. When that arrangement was dismantled in 1970, JRD’s writ no longer ran over all Tata firms as the board of directors of individual companies became independent of the parent. JRD had to rule employing both influence and persuasion.

Going by Cyrus Mistry’s leaked letter to the Tata Sons board, and the accounts of those such as Nirmalya Kumar (a London Business School professor and a Mistry-appointed member of the Tata Sons group executive council), Ratan Tata, despite not being chairman of Tata Sons – and by virtue of being chairman of Tata Trusts – wanted to recreate the pre-1970 model to burnish his own legacy.

Nationalism as business model

Ratan Tata is credited with expanding the group’s revenues nearly 50-fold, from $2 billion to $100 billion, during his 21-year term as chairman. When he retired in 2012, the panegyrics poured in. “All of this he [Ratan Tata] has done demonstrating the highest level of integrity and with courtesy, grace and humility. These are lessons enough for ages,” gushed Infosys co-founder NR Narayana Murthy.

Much of Tata’s furious global expansion was fuelled by debt. While the encomiums accrued to Ratan Tata, the difficult task of managing the debt fell on Mistry.

Businessmen possess passports, not their businesses, especially when run globally. However, under Ratan Tata, the group actively peddled a narrative of nationalist pride, using media outlets that were more than willing to play along, every time it made an overseas acquisition.

The most expensive of these buys was Corus, the Anglo-Dutch steelmaker that today is virtually the rusting chalice that holds the poison.

In 2007, at the peak of the global commodity boom, Ratan Tata spearheaded the purchase of Corus at $12 billion. The Indian media turned the nine-round bidding war between Tata Steel and Brazil’s Companhia Siderurgica Nacional into a WWE Wrestlemania of steel giants. When Tata did win the race, coughing up a 50% premium, business press readers were reminded about this 1907 quip from the colonial railwayman Sir Frederick Upcott, “Do you mean to say that Tatas propose to make steel rails to British specifications? Why, I will undertake to eat every pound of steel rail they succeed in making”, and Sir Dorabji Tata’s wry riposte a decade later that had Upcott kept his promise, “he would have had some slight indigestion”.

Today, Tata Steel’s losses, thanks chiefly to Corus, are as high as $10 billion as Mistry’s letter pointed out.

The JRD syndrome

It could charitably be argued that several of Ratan Tata’s ambitious overseas forays now haemorrhage due to the vagaries of global business cycles. But the Nano car project and the long-cherished re-entry into the aviation sector through not one but two (Vistara and AirAsia India) ventures was legacy-leaving gone horribly wrong.

Air India, the brainchild of JRD Tata, started life in 1932. Despite its nationalisation in 1954, JRD continued to be the airline’s unpaid chairman till 1978. when the Morarji Desai government sacked him. According to his biographer Lala, JRD had two major outlets. One was industry itself where he sought to widen his range of active interests so that his will to power could find greater expression. The second was aviation. “At an early age, when his ambition was at its height, his will to power widened,” Lala wrote. “In aviation he had a world he could call his own… With aviation he felt, he could glide like an eagle over an immense valley, at times flapping his wings, at other times riding almost steady, tipping his wings gently here or there, buoyed up by the warm air beneath.”

A passionate aviator himself, the business of flying has always been close to Ratan Tata’s heart.

That the trouble for the airline industry began when the Wright brothers’ aircraft took off, is a line executives in the business love to regurgitate to emphasise the perpetually parlous state of the sector.

In the run-up to Tata’s resumption of the aviation business around 2012-’13, it was amply clear that most airlines in India were struggling to even make ends meet. The Vijay Mallya-owned Kingfisher went belly up in 2012, and others such as SpiceJet were on the edge of the precipice.

Regardless, Ratan Tata pursued his dream. AirAsia India and Vistara, combined, have a market share of less than 5%.

The Nano’s launch in 2009, too, was accompanied by a narrative of nationalist pride. The jinxed car project could never live up to the billing of a Rs 1 lakh car powered by frugal Indian engineering. In the first eight months of 2016, less than 5,000 Nanos were sold and the project has racked up losses in excess of Rs 1,000 crore. “There is no line of sight to profitability for the Nano and any turnaround strategy for the company requires to shut it down. Emotional reasons alone have kept us away from this crucial decision,” alleged Mistry in his letter.

RM Lala, in Beyond The Last Blue Mountain, records a 1987 conversation with JRD Tata about how after the managing agency system was abolished, other big industrial houses had either split or drifted apart. “But we have not,” JRD proudly added. “So long as you are there. After you?” asked the biographer. “Ratan is aware of that,” replied JRD.

Given Mistry’s acrimonious exit, the cloud of questions that hangs over the group’s carefully crafted image, and an unwieldy debt-stricken empire, Ratan Tata’s legacy could well be the crushing burden of hollowness.