Power to select Ratan Tata’s successor lies with 20 trustees

MUMBAI: The power to select the next chairman of Tata Trusts, which has an all encompassing control of the salt-to-steel conglomerate, after Ratan Tata steps down, lies with 20-odd trustees, most over 65 years old.

The selection will depend on the criteria defined in the century-old founding documents of these Trusts. Trusts were instrumental in the removal of Mistry on October 24. Ratan Tata is the current chairman of Tata Trusts that controls 66% shareholding in Tata Sons, the holding company of the Tata enterprises.

"The Trustees together appoint chairman/chairperson. The fundamental criteria would be whether the person shares the vision of Jamsetji Tata and his two sons, Sir Dorabji Tata and Sir Ratan Tata, which are all clearly set out in the Trust Deeds," Tata Trusts spokesperson Debasis Ray told ET in an email response.

The power to select Ratan Tata's successor, therefore, lies in the hands of twenty trustees that run India's most powerful charity organisation. There are no laws governing the selection of chairman of a charity organisation, according to Maharashtra Public Trust Act.




Mistry has already raised questions around the governance of these Trusts and questioned the ability of these trustees to take decisions that impacts the $103 billion conglomerate, which earns 69% of the revenues from its overseas operations. "Trusts are playing the role of the ultimate promoter. There is opaqueness of governance. Succession planning is a big challenge. These people (trustees) are not in their prime of health," a person close to Mistry said.

RVenkataramanan, the managing trustee of the philanthropic body and Ratan Tata's former executive assistant, is the youngest among them. Other prominent names are NA Soonawala (81), NM Munjee (64) and KB Dadiseth (71). Amit Chandra (48) and Venu Srinivasan (63) are recent inductees. Tata Trusts' spokesperson Ray said that historically major Tata Trusts have had outstanding personalities of India drawn from different areas to serve as trustees.

The trustees are generally appointed for specific terms, although given the philanthropic activities of the Trusts, many trustees have been appointed for life, he added. "Given the recent events it becomes very critical to know who is going to succeed the present Tata Trusts chairman, Ratan Tata. You need a structure in place that transcends the people who are there. It is going to impact the operating of the companies which are listed," said Amit Tandon, managing director at IiAS, a proxy shareholder advisory firm.

Before Mistry was appointed the chairman of Tata Sons in 2012, both Tata Trusts and Tata Sons always had the same person at the helm, eliminating conflicts between the two. However, since Mistry’s ouster effectiveness of the dual power structure and the role of trustees in business decision-making are being questioned.

"Trust is not a corporate body. It is a not a legal entity, it is a legal obligation. The Charity Commissioner can't interfere with appointments and salaries," said Noshir Dadrawala, CEO at Centre for Advancement of Philanthropy, a company specialising in the areas of charity law. "Good governance and best practises would demand that they make the succession plan clear to all stakeholders, including the public."

Tata Trusts have a unique position in India because they are allowed to hold shares in a commercial entity despite being completely income tax exempt given their charity work. Sir Ratan Tata Trusts and Dorabji Tata Trusts were founded in 1918 and 1932 after the sons of Jamsetji Tata, Ratan and Dorab, who bequeathed their Tata Sons shareholdings to these Trusts for philanthropy.

ET had reported on November 21 that Mistry is exploring the possibility of legally challenging the power of the Tata Trusts to influence business decisions at the Tata group. Mistry’s team is said to have prepared a governance report on issues related to the group’s structure but was sacked before he could present it.