A report in
The Economist
said
Ratan Tata “created the mess” at Tata Group by “breathing down [the] neck” of Cyrus Mistry, who succeeded him as the group’s chairman. Mistry was fired by the holding company on October 24.
The value of Tata Group’s listed firms has dropped by $17 billion since September, the report noted. And the company has lost its reputation as “a rare beacon of good governance in Asia” because of the fight for control between Ratan Tata and Mistry. “Mr. Tata needs to get a grip before his legacy and the company are destroyed,”
The Economist
asserted.
Since Mistry succeeded Tata as chairman, he has had to contend with problems stemming from his predecessor’s “expansion binge,” including acquisitions that have not been providing sufficient return on capital, the article said. While loss-making businesses should be closed, sold or restructured, “Mr. Mistry is keenly aware of what is wrong but has not dealt with it,”
The Economist
said.
Although Mistry was removed from the holding company, he remains at some of the operating companies whose boards support him. Split oversight of the group “is farcical and dangerous,”
The Economist
said.
The report said that since Tata apparently can’t make peace with Mistry, he should reassert control.
The Economist
also called on Tata to take necessary action at the loss-making businesses and list to main holding company “so that it is subject to outside scrutiny.” The article also suggested that the “murky and secretive charitable trusts” that control the holding company sell down their stake to below 50% and diversify their assets. “The result would be a streamlined group that is accountable to investors, instead of a rickety legal pyramid designed before India won independence in 1947,” the article said.
The Economist
also advocated a limited time frame for Tata’s return to leading the company. (Source:
The Economist
, Nov. 19, 2016.)
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