The decision to reappoint N Chandrasekaran for a fresh five-year term as Tata Sons chairman has led to a senior management feud. The new term was approved by the company’s board last week, even as the chairman had decided not to put himself up for a re-election last month. The Tata Trusts Chairman’s Noel Tata has opposed it saying the resolution was untenable.
The move raises questions over the Tata group’s own governance as Tata Sons is the umbrella company of the Tata Group conglomerate which is also now weighing some major decisions over its listing and regulatory status.
N Chandrasekaran To Continue As Chairman Of Tata Sons
On September 17, the Tata Sons board approved reappointing Chandrasekaran for a term of five years after completion of his current term on February 20, 2027.
The decision was taken several weeks after Chandrasekaran told the board he would not put himself forward for re-election. A Tata Sons spokesperson said the company’s Nomination and Remuneration Committee looked into the matter after Chandrasekaran’s resignation and advised him to hold on for the interests of Tata Group and his experience.
Chandrasekaran consented to revisit the decision, and then the board held a vote on his continuation. The resolution was supported by the majority of directors.
Chandrasekaran is serving his second five-year term as chairman of Tata Sons, a position he first took up in 2017.
Why Tata Trusts Has Opposed the Reappointment
This latest move has put Tata Trusts at loggerheads with Tata Sons’ board.
Noel Tata, the chairman of Tata Trusts and one of the 15 Tata Trusts directors that served as nominee directors on the board of Tata Sons, voted against reappointing Chandrasekaran. Tata Trusts later described the resolution as a “legal nullity”.
The Trusts relies on its reading of the Articles of Association of Tata Sons. It says that a majority of the representative directors of the Tata Trusts need to approve a chairman’s appointment and submits this includes a director’s reappointment as well as appointment.
Tata Trusts said that since Noel Tata had opposed the resolution it did not have the support of the requisite majority.
Noel Tata also filed an opinion from former Chief Justice of India Justice DY Chandrachud in favour of the Trusts’ understanding, the Trusts said. Tata Trusts said this opinion was not considered by the board.
Tata Sons Has a Different Account
There is a different account of what Tata Sons has said from what is stated here.
Tata Trusts, the company’s other key stake holder, earlier also told the company that it was happy with Tata Group Chairman Chandrasekaran’s performance and had backed him to continue as Tata Group Chairman for another term of five years, following which the matter was discussed by the board.
In the months that followed Chandrasekaran’s departure notice came in August indicating he did not wish to contest for another term, the board’s Nomination and Remuneration Committee reviewed the case and asked him to recontest and was advised to return.
The board ultimately ratified the new term by 3-2 vote on September 17.
This discrepancy in signification is now at the centre of the Tata Sons leadership dispute.
Tata Sons Listing Compounds the Problem
The reappointment of chairman is one of the important decisions taken byTata Sons.
The board has also resolved to make such efforts as may be required to comply with the Reserve Bank of India, seek guidance from the RBI, Tata Trusts and other relevant parties in the matter of the company being regulated.
The issue comes on the RBI turning down an application by Tata Sons to surrender its registration, which had revived the debate around the prospect of a public listing of the parent company.
Similarly, the listing question has also revealed the division in the broader Tata set-up and hence has made the September 17 board meeting even more critical.
What Happens to Chandrasekaran’s New Term?
While the Tata Sons board has cleared the reappointment of the five-year period, the battle isn’t over yet.
The Tata Trusts collectively hold about 66 per cent in Tata Sons, making the shareholder group critical for any matter requiring shareholder approval. The AGM of the company is poised to become an important platform for the next phase of the row.
QUESTION Whether the divergent views over the Articles of Association of Tata Sons will be put to rest through shareholder activism, legal process or by between Tata Trusts and the company’s board.
The Tata Group leaders are facing the challenges of corporate governance, leadership succession and the future of Tata Sons once again.
