DC Edit | Noel Concerns Legitimate, Tatas Must Resolve Them

A public fight between the directors of Tata Sons, which indirectly controls over 100 companies and is the largest corporate conglomerate, and its difference of opinion with its promoter Tata Trusts is unfortunate.

After the Reserve Bank of India (RBI) rejected its request to surrender an NBFC licence, the Tata Sons Board in a majority decision, reappointed incumbent chairman N. Chandrasekaran for another five years. The decision split two nominee directors of Tata Trusts, with Noel Tata opposing it, while Venu Srinivasan approved it.

Since any major decision at Tata Sons needs approval from the majority nominee members of Tata Trusts, the promoter of Tata Sons called the decision illegal. Noel Tata also opposes the public listing of Tata Sons and wants the board to explore all options available to protect its unique charity-led ownership structure. Other directors of Tata Sons, however, appear to have accepted the inevitability of listing and want Mr Chandrasekaran to lead it.

Mr Chandrasekaran is one of the best corporate leaders in India. As Tata Sons argued, he is the best person to lead the historic transformation of 108-year-old Tata Sons. However, Noel Tata questioned Mr Chandrasekaran’s appointment as chairman because the company’s general body, where Tata Trusts holds the majority, had not yet convened to renew his directorship. This statement raises an important legal contention that Tata Sons must address.

Tata Sons, incorporated on November 11, 1917, is owned by an extremely close-knit group, with the largest beneficiary being the charitable trusts. Nine charitable trusts, collectively known as Tata Trusts, own a 64.53 per cent stake. The Shapoorji Pallonji Group owns 74,352 shares, or an 18.40 per cent stake. Ten Tata Group companies own 60,851 shares, or a 15.05 per cent shareholding. Eight members of the Tata family hold 8,129 shares, or a 2.01 per cent stake.

Given the Tata Group’s unique character, Noel Tata believes Tata Sons should not be listed on stock exchanges as listing will increase pressure on the board to meet profit-linked goals — a stance that is logical and plausible.

In March 2024, the Tata Sons board under the guidance of Ratan Tata unanimously resolved to remain unlisted. The incumbent directors must, therefore, explain why they abandoned their previous resolution when options were available to seek a legal remedy.

Since Tata Sons is not owned by an individual or a family and has been a vehicle for the country’s largest philanthropic initiative, the RBI should not use the same yardstick it uses for individual or family-run companies. Regarding transparency and public accountability, all major Tata companies are already listed on exchanges.

The Tata Group is one of the most respected conglomerates in the country, having contributed immensely to Indian industry. Its board members and the representatives of the Tata Trusts and Tata family, therefore, must protect its respect and its brand by resolving their differences internally, without washing dirty linen in public.