TATA

SONS
 Table of Contents

Topics Covered
Overview

Timeline of events
Independence
Challenges by
Structure
family owned
companies.
Judgement
Tata trust in Tata
sons
TATA SONS
1. Tata Sons is the holding company for the
group's operating entities and the promoter of
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them.

2. Philanthropic trusts own 66 per cent of Tata

Sons' equity share capital, which supports
education, health, livelihood generation, and art
& culture.
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3. Each Tata firm or organisation functions

autonomously, with its Board of Directors
guiding and supervising it.
LEGACY OF
TATA TRUST
STRUCTURE
TIMELINE
 Question 1
Challenges of family-owned companies and how this might have contributed to
the corporate governance upheaval at Tata Sons.

Lack of succession planning

Resistant to change
Lack of talent
Control of Operations
Responsibilities and roles are not clearly defined with Board of Directors acting as
agents.
Communication barriers
Lack of trust
 Question 2
Discuss the role of Tata Trusts in the corporate governance of Tata Sons.

Tata Sons' share capital is held by TATA trusts to the amount of 66%.
Because the major trust property is owning shares in TATA Sons, the future of the
TATA Group depends on how the trustees run the TATA trusts.
Voting rights related to shares of any firm held in trust were originally invested in
the hands of a "public trustee," a government-appointed person, under company
law. As a result, the management of Tata sons by Tata trust trustees was subject
to voting power performed by a government body.
The Tata trusts have the right under the AOA of Tata Sons to nominate "Trustee-
Nominated Directors," who have a specific veto power.
 Question 3
Mistry was the Chairman-cum-CEO at Tata Sons. What concerns does this raise?
Does the strong presence of the controlling shareholders mitigate these
concerns?
Tata Sons' directors' representation on the boards of other Tata Group firms was limited because he
wanted to be sole director.
Since he was seen as detrimental to Tata Sons’ future, he was ousted as a director at an EGM held on 6th
February 2017 – 80% voted in favour of his removal.
Tata Trusts hold 65% controlling stake in Tata Sons. Presence of controlling stakeholders hence helped
mitigate these concerns.
He retained his position as a director of multiple Tata Group firms after being dismissed as Chairman, and
it was thought that his ongoing presence as a director would be a "disruptive impact" on these boards due
to his enmity against Tata Sons. Separate EGMs were held by Tata Group firms to remove Mistry from his
board positions.
He was ousted from TCS Ltd.'s board at the first of six planned EGMs
Mistry then resigned from the boards of all Tata Group companies on 19 December, 2016, except Tata
Sons.
 Question 4
Is an independent director truly independent when the promoter is permitted to
propose and vote for his removal?

This was a question raised by Nusli Wadia on his removal as an independent

director from the boards of Tata Steel, Tata Motors and Tata Chemicals.

He was removed from the boards of these companies after he backed Mistry
when the latter was ousted as Tata Sons Chairman.

Wadia also argued that promoters who had moved the resolution for the removal
of independent directors should not be allowed to vote.
What to do to regain Investor confidence?
Could have explained the reasons for dismissal

Could have re-iterated their policy about whistleblower safety.

Could have gone into a little more detail about the objectionable decision
that Mr Mistry was taking. For example, regarding Tata Corus, Jaguar, etc.
Question 5
In light of the leaked email surfacing Tata’s struggles to the public, do you think the
Tata Group handled the crisis well? What could the Tata Group have done to avoid
loss of shareholder confidence?
 Question 6
Discuss corporate governance issues that arise in the case of a conglomerate like
Tata Group, with a holding company structure and various listed and unlisted
subsidiaries. What issues might arise from directors serving on the boards of
various companies within the Group? Should a director who serve on the boards
of a parent and subsidiary, or in multiple companies within the Group, be
considered independent?

Dominant powers are given to the majority shareholders

Independence in decision making

Conflicts of interest abound at the board level

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