Ratan Tata may remain head of group trusts

With no provision of a retirement age for the chairman in two key Tata trusts, Ratan Tata can continue to play an indirect role in the group even after stepping down as its chairman in December 2012.

Ratan Tata is the chairman of the board of trustees in two key Tata trusts, Sir Dorabji Tata Trust and Sir Ratan Tata Trust.

These two trusts together control a majority stake in the group holding company, Tata Sons.

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Tata Sons is the promoter firm of the group, through which it wields control over 90-odd companies of the Rs 3,79,675-crore (Rs 3,796.75 billion) salt-to-software conglomerate.

Sources in the know say just like his predecessor, J R D Tata, Ratan Tata will likely remain chairman of the trusts for life. Before Ratan Tata's appointment, however, the chairmanship of the two trusts was held by different individuals.

While J R D Tata was the chairman of Sir Dorabji Tata Trust till his demise in November 1993, Naval Tata (Ratan Tata's father) was at the helm of affairs at Sir Ratan Tata Trust until his death in 1989.

In both cases, the chairman's baton was passed on to Ratan Tata, also the chairman of Tata Sons.

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However, while individually the two trusts do not hold a majority stake in Tata Sons, together they do so, based on the shareholding patterns available in the public domain.

When contacted, a Tata Sons spokesperson said, "The Sir Ratan Tata Trust was set up in 1918 and the Sir Dorabji Tata Trust in 1932.

The chairmanship of the trusts has nothing to do with the chairman of Tata Sons. Furthermore, the chairmanship of the trusts does not have a retirement age, so no changes have been made in the trust deed for Ratan Tata."

Apart from these two Tata trusts, the Shapoorji Pallonji family has a stake of around 18.3 per cent in Tata Sons.

Officially, the Tata Group websites say various trusts, including Sir Dorabji Tata Trust and Sir Ratan Tata Trust, control over 66 per cent in Tata Sons.

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Tata Sons also has a 50 per cent stake in Tata Industries, an investment vehicle which concentrates on new emerging opportunities and high-tech areas.

The five-member selection committee set up to find a successor to Tata Group chairman Ratan Tata in August 2010 has N A Soonawala, former vice-chairman, Tata Sons, R K Krishna Kumar, director, Tata Sons, Cyrus Mistry, the younger son of Pallonji Mistry, Lord Bhattacharya, a businessman based in the UK who runs Warwick Manufacturing, and Shirin Bharucha, a lawyer for the group.

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The panel is expected to name the successor to Ratan Tata by the year-end after an aggressive global search.

Among the hot favourites is Ratan Tata's half-brother Noel Tata, who after a successful stint in Trent (the retail business of the group) has also been given the responsibility to run Tata International as a managing director.

The selection panel is also reportedly discussing the creation of a new post of group chief executive officer at Tata Sons.

The move is meant to create an enabling structure for the new chairman, where he or she will have an experienced team to share some of the responsibilities of running the conglomerate through Tata Sons.

Tata Group's activities are overseen by two key bodies.

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The executive office reviews business activities of all group companies. Besides Ratan Tata, it has R Gopalakrishnan, Ishaat Hussain, Kishore Chaukar and Arunkumar Gandhi.

Then there is the group corporate centre, which reviews policy issues related to growth and takes decisions on entering new areas.

It also promotes the Tata brand and provides advisory services to group companies in human resources, finance and legal affairs.

It comprises Ratan Tata, R K Krishna Kumar, R Gopalakrishnan, Ishaat Hussain, Kishore Chaukar and Arunkumar Gandhi.