Tatas vs Tatas — five blunt responses and a reality check

The ongoing dispute surrounding Tata Sons has sparked a fierce debate among the commentariat, with many attempting to take a stance against the family who have had their interests unfairly undermined by a coalition of forces. At the center of this controversy lies Tata Trusts, which holds a majority stake of two-thirds in Tata Sons.

It is unjustifiable that any board would defy the wishes of the majority owner and act against their explicit desires. This situation is reminiscent of Kafka's surreal world, where Noel Tata is expected to remain focused on managing Tata Trusts while leaving the commercial affairs of Tata Sons to someone else.

In response to this absurdity, I present five blunt rebuttals:

1. It does not matter if the majority owner of Tata Sons is a charitable trust or an entity from outer space. The fact remains that they possess the numerical advantage, and their perspective should be respected.

2. The so-called independent vote of the board, far from being a triumph for corporate governance, is actually its downfall. Two independent directors and two professionals, who collectively own little or no shares, voted against the majority owner, thereby undermining their own cause.

3. Noel Tata has the power and the obligation to overhaul the board of Tata Sons and revise the Articles of Association that enabled this coup attempt. The notion that Tata Sons is a sacred national institution that he cannot protect is nothing more than empty rhetoric. If the current governance structure has outlived its usefulness, it should be altered by the majority owner.

4. The idea that the current chairman must possess extraordinary skills to navigate the complexities of Tata Sons is groundless. His position should be evaluated based on objective criteria, and there is no inherent reason to assume that his incumbency automatically qualifies him as the best person for the job. Tata Sons must provide a compelling argument as to why he is the right choice, and so far, they have failed to do so.

5. The assertion that an unlisted Tata Sons could pose a systemic risk to the Indian economy or India's global reputation is unfounded. Though there may be some similarities between IL&FS and Tata Sons in terms of asset size, the two entities are fundamentally different. IL&FS carried a staggering debt of Rs 91,000 crore against a meager equity stake, while Tata Sons boasts zero borrowings and a net profit of around Rs 30,000 crore.

Therefore, Tata Sons could readily repay debt as large as IL&FS's in a matter of three years or less. Regardless, the wise individuals who cannot present a coherent case for the listing of Tata Sons need to reconsider their approach and focus on advancing the interests of the company.

The example of Novo Nordisk in 2025, where a controlling foundation overruled its own commercial entity's board, serves as a stark reminder of what a controlling foundation looks like when it acts openly.