Indications of ‘parallel power centres’: Recent succession calls spotlight Noel's rift with Tata Sons

Tata Sons has been blindsided by leadership succession decisions at some Noel Tata-led group companies, which have appointed new chairpersons without seeking the holding company’s customary approval, people close to the matter said.

The appointments, made as Noel Tata stepped down as chairman on turning 70 this month, have brought into sharper focus the rift between Tata, who heads Tata Trusts, and Tata Sons, led by N Chandrasekaran, over authority and the holding company’s role in succession decisions at group companies.

ALSO READ | Noel Tata steps down as Tata Investment Corp chairman, named chairman emeritus; Bahram Vakil to take over


While people cited above said Tata Sons’ approval has always been sought for such appointments till now, legal experts said such approval would be legally mandatory only if the company’s Articles of Association specifically provides for it. The Companies Act, 2013 does not require a promoter or holding company to approve the appointment of a chairperson.

The appointments of Bahram Vakil as the chairman of Trent and Tata Investment Corporation, Sunil Dsouza as the chairman of Voltas, and TV Narendran as the chairman of Tata International, were made without taking prior approvals from Tata Sons, the people cited earlier said.

ALSO READ | Noel Tata proposes splitting Tata Sons as alternative to RBI-mandated listing

The holding company is likely to take up the matter at its next meeting, they said, adding that the emergence of parallel power centres within the conglomerate is a concern.

Tata Sons and Noel Tata did not comment.

The developments have raised questions at the holdco over the extent to which operating companies are beginning to function independently of the group’s central leadership and governance framework.

Noel Tata was in control of all strategic decisions and business plans at the group companies he chaired, officials said.

However, appointments of a chairman or CEO of these companies have always been taken up to Tata Sons for approvals, they said. “These are practices always followed by the Tata group. The chairman of Tata Sons has the choice of being the chairman of any group companies he wants to,” a group insider explained.

Not Enough Interest?

All these companies are subsidiaries of Tata Sons and have to update Tata Sons on board developments, the person said.

Officials close to Noel Tata, however, shrugged off the suggestion that Tata Sons was blindsided by the appointments and hinted that the holding company did not do enough to facilitate the succession process. "Tata had announced his retirement plans well in advance, so the question is whether the succession issue was adequately addressed in time," one of them said. "Shouldn't Tata Sons, as the principal shareholder, also have taken an active interest in the transition and initiated discussions on succession or nomination well before the retirement?"

Group company CEOs, meanwhile, are conflicted about showing allegiance and loyalty to either side on such matters, insiders said.

As a matter of corporate law, a company's board chooses its chairperson (amongst all the directors), subject to its Articles of Association and applicable regulations.

"The dispute, therefore, appears to be about group authority and convention, not the legal validity of the appointments," said Harshal Anjaria, founder of Shreeyam Advisors.

Tata Sons' approval would be legally mandatory only if the company's articles make it a reserved or affirmative-vote matter. Restrictions outside the articles generally do not bind the company itself, he explained.