Home > Opinion > Cyrus Mistry met Russi Mody’s fate

Cyrus Mistry met Russi Mody’s fate

 Nantoo Banerjee |  2016-11-01 23:20:18.0  |  New Delhi

Cyrus Mistry met Russi Mody’s fate

The Rs. 7,00,000-crore Tata business empire was mostly built and expanded by non-Tata manager-entrepreneurs such as Sumant Moolgaokar (TELCO), Darbari Seth (Tata Chemicals and Tata Beverages), Xerxes Desai (Titan Industries), Subramaniam Ramadorai (TCS), Ajit Kerkar (Indian Hotels), and Russi Mody (Tata Steel). Interestingly, they all worked with JRD Tata, who accorded them full freedom and authority to run their enterprises as their companies. JRD had spotted their entrepreneurship talents early.

JRD was so impressed with the way Russi steered Tata Steel during its most turbulent times in the late 1970s that he eventually rewarded the maverick TISCO chief executive as the company’s chairman in 1984 by resigning himself from the most prestigious post in the Tata Group. Set up by the group founder, Jamshetji Tata, in 1904, TISCO (Tata Steel) is the group’s flagship company. Tata Steel was under a serious takeover threat by Morarji Desai’s Janata government in 1979. The job was easy. The government-owned Life Insurance Corporation of India held over 47 percent of TISCO’s equity capital as against only some four percent by Tatas Sons Limited, the promoter. Russi took the company’s 60,000 employees on the street to protest against the government design until the latter gave up.

However, JRD’s successor in Tata Sons and Tata Trusts was uneasy with TISCO’s non-Tata chairman’s clout. Russi Mody was booted out of the company almost in a similar fashion as Cyrus Mistry was from Tata Sons at a board meeting in Bombay in his absence. The resolution to throw Russi out of the top TISCO job was kept  “hidden” under “any other matter” in the board meeting agenda, precisely the way Cyrus Mistry’s sack notice was kept out of the regular board meeting agenda. Disgraced Russi was so upset with the Tata Sons chairman that he decided to live in Kolkata, far away from Ratan Tata’s shadow until his death. Russi was rewarded by Prime Minister Atal Bihari Vajpayee, who made him the chairman of Air India. Russi’s disgraceful exit from TISCO scared both Moolgaokar and Seth that they pined for their term to end and exit in due course. Ratan Tata, who broke his retirement rule to return at the helm of Tata Sons after the sacking of Cyrus Mistry, never made the mistake of according full authority to another Tata satrap to compromise his position as the principal promoter of the group.

In a way, Cyrus was treated much worse than Russi Mody by the Tata Trust chairman. Cyrus was not just the chairman of Tata Sons and all the other core group companies. His family is also the second largest shareholder of Tata Sons. He left a big family job to run Tata Sons at a difficult time. Tata Sons, under Ratan Tata, had acquired too many sticky assets, the biggest of them being Anglo-Dutch Corus Steel, which their former owners failed to operate, for a hefty sum. Corus has the potential to eat up even Tata Steel, especially after Brexit and continuing depression in the global steel market. The future of another ambitious takeover of Jaguar-Land Rover also hangs in the balance after the Brexit. Tata Hotels are not doing too well. The group’s re-entry into the civil aviation space through a partnership with two foreign airlines also looks rather uncertain, despite the massive double digit growth of passenger load factor in India, as the airlines business always appears to be dicey all over the world. The post economic reform, India recorded the largest number of airline services failure.

The operations of Tata Sons’ vast business empire need to be rationalised. And, that is what Cyrus Mistry was trying to do. It was probably not acceptable to a more aggressive Ratan Tata, who failed to take advantage of India’s telecom boom to put Tata Teleservices as the country’s top service provider.  Incidentally, Tata Teleservices is in doldrums with Japan’s DoCoMo resorting to arbitration proceedings in India, UK, Singapore and elsewhere to recover at least $1.2 billion from the Tatas as compensation for business separation. Others who entered the Telecom business after the Tatas are far ahead of Tata Telecom. This is even after the Tatas managed to acquire from the government Videsh Sanchar Nigam Limited (VSNL). Although under Ratan Tata, the business empire grew like a banyan tree with too many weak trunks that seem to turn sapless and defocused under present circumstances.  As an independent manager-entrepreneur, Ratan Tata, who was first tasked to rejuvenate NELCO in the 1970s, failed in the beginning. On the contrary, Aditya Vikram Birla, who too was initiated into the Birla group by G D Birla with the task of managing a sick Birla firm, proved to be a great success in the job.

Tata Sons’ biggest success story today is that of TCS (Tata Consultancy Services). The manager entrepreneur of this enterprise, Ramadorai, who steered the growth of the information technology company 15-fold to $6 billion with an employees’ strength of 2,00,000 and presence in 42 countries, could hardly find the accolade from Tata Sons that he deserved. As an advisor to the Prime Minister of India, Ramadori was given a Cabinet rank though he was given little role in the broad affairs of Tata Sons. For Cyrus Mistry, an entrepreneur-turned-manager, it may be difficult to swallow the sudden and most disgraceful exit silently. But knowing the history of the management of Tata Sons under Ratan Tata, one expected Mistry to be more cautious before taking up the challenging assignment, leaving the remote control with nearly octogenarian Ratan Tata occupying the ringside corner at Tata Trusts that owns over 60 percent share of Tata Sons. It seems he paid for his trust in Ratan Tata and Tata Trusts. 

(The views expressed are strictly personal.)

Share it
Top