TATA VS MISTRY:

SUCCESSION PLANNING

Group 4
 Who is Cyrus Mistry?
Cyrus Mistry was a scion of the Shapoorji Pallonji Group, which is known for its interests in construction, real estate
and engineering businesses. But it was his appointment at the helm of the Tata Group and subsequent ouster that
brought him in the spotlight.

Shapoorji Pallonji family, the group's parent entity, is the single largest shareholder in Tata Sons with 18.47% stake.
And that got the family a seat on the board of Tata Sons. After his father Pallonji Mistry stepped down from the board,
Mistry was named as a director in 2006. In 2011, he was roped in to head the conglomerate to replace Ratan Tata and
took over in 2012. But was removed four years later in October 2016, and that is where the whole saga began.
 The Saga
After four years at the helm, Mistry was replaced in a boardroom coup in October 2016, which saw Ratan Tata coming
back to helm the group before the reigns were passed on to N Chandrasekhar. The exit turned bitter with Mistry
dragging the storied corporate grouping to courts to get the reasons for his exit. Mistry claimed his work was
appreciated a few months before and wanted to know the reasons that led to the sudden removal from the
chairman's post. Mistry had begun on a wide-ranging drive to improve governance practices at the group.

During his time at the helm of Tata Group, Mistry depended on a specially created group executive council (GEC)
consisting of handpicked executives from within Tata Group, industry executives and also academia to drive
operations. He was termed as a studious backroom executive who had a sharp mind. A naturally reclusive nature
and a conviction for the work to do the talking meant there was very little known about Mistry even during his time at
the helm.

Mistry took legal action against Tata Sons, demanding an explanation for his exit. But ultimately lost the case against
Tata Sons
 Unethical side exposed
1. Mr. Cyrus Mistry misled the Selection Committee set up in 2011 for selecting a Chairman of Tata Sons to
succeed Mr. Ratan Tata by making lofty statements about his plans for the Tata Group and more importantly,
indicated an elaborate management structure for managing the Tata Group. After waiting for a period of four years,
almost none of these management structures and plans have been given effect to.

2. When Mr. Mistry was appointed as Executive Vice-Chairman in 2011, he was informed that he should distance
himself from his family enterprise - Shapoorji Pallonji & Company. This was suggested keeping in mind good
corporate governance principles. Mr. Mistry agreed but after some time, Mr. Mistry retracted his position and
indicated that he could not find a way of doing so. Such conduct by Mr. Mistry was inappropriate and created a
sense of breach of trust on his part. It also posed a significant challenge to the high corporate governance.

3. The Tata Sons Board has been concerned for some time about the financial performance of Tata Sons of which
Mr. Mistry was the Executive Chairman and primarily responsible for its performance. During Mr. Mistry’s tenure as
Executive Chairman, dividend income (other than from TCS) declined continuously and on the other hand, staff
costs more than doubled.
 Unethical side exposed
4. Mr. Mistry gradually concentrated all power and authority in his own hands as Chairman in all the major Tata
operating companies and systematically diluted the representation of Tata Sons on the Boards of various Tata
Companies, whilst being fully cognizant that Tata Sons is the main promoter and largest shareholding group. This
led to the weakening of management structures in Tata Companies contrary to his fiduciary duties.

5. when Mr. Mistry was removed as Chairman of Tata Sons and asked to step down, he chose to resort to selective
media leaks and media statements, knowing well that his actions would hurt and damage the companies even
while remaining as their Chairman.

6. It has always been Tata's policy to tackle difficult situations and turn them around. Instead, he took the easy
option of taking large amounts of write-offs to huge detriment of the shareholders and blaming it all on the past
management.
 The Timeline

November 2011 October 2016 December 2016 July 2018

Tata Sons Names Mistry As Tata Sons Removes Mistry NCLT Dismisses Mistry’s
Mistry Mounts Legal Challenge
Ratan Tata's Successor As Chairman Plea Against Tata Sons

December 2019 January 2020 January 2020 March 2021

Cyrus Mistry Wins At Tata Sons Pushes For Supreme Court Stays Full Supreme Court Sets Aside
NCLAT Urgent Supreme Court NCLAT Order NCLAT Order In A Win For
Hearing Tata Sons

NCLT - National Company Law Tribunal NCLAT - National Company Law Appellate Tribunal
 Why Did Succession Planning Not
Flourish
Lack of Clarity Resistance to Change Leadership Differences
Lack of clear and Mistry's efforts to divest Cyrus Mistry had a different
transparent succession underperforming assets & leadership style and
planning within the Tata cut costs were met with approach compared to his
Group resistance from some predecessor, Ratan Tata
While Cyrus Mistry was quarters within Tata These differences in
appointed as the Chairman Group, where long- leadership and
in 2012, the process leading standing practices were management styles created
to his appointment was not deeply ingrained tensions within the
adequately communicated This resistance to change organization and led to
or understood by all can impede effective resistance to his changes
stakeholders succession planning and strategies
 Why Did Succession Planning Not
Flourish
Legal and Regulatory Family and Shareholder Corporate Governance
Challenges Disputes Issues
The legal and regulatory The Tata Group is a family- The case raised questions
environment in India also controlled conglomerate, about the corporate
played a role and the involvement of the governance mechanisms
It raised complex legal Mistry family in the It highlighted the need for
questions related to succession process added more robust governance
corporate governance and complexity practices, including
board decisions The subsequent legal battle independent boards and
These legal complexities can between Cyrus Mistry and well-defined procedures for
further complicate Tata Sons revealed deep- succession planning and
succession planning efforts seated shareholder disputes dispute resolution
What is Career Crossroads Model?
It is a framework that can be used to help individuals and organizations make informed career
decisions

The model is based on the idea that there are five key career crossroads that everyone faces at
some point in their careers:

1. From individual contributor to manager

2. From manager to senior manager
3. From senior manager to executive
4. From executive to general manager
5. From general manager to chairman or CEO

At each crossroads, individuals and organizations face a number of challenges and opportunities.
The Career Crossroads Model can help individuals to identify their strengths and weaknesses,
assess their career goals, and develop a plan to achieve their goals.
How to use Career Benefits of
Crossroads Model? Crossroads Model
The Career Crossroads Model offers a number of
To use the Career Crossroads Model, individuals and
benefits, including:
organizations can follow these steps:

It can help individuals to make informed career

1. Identify the individual or organization's current
decisions.
career crossroads.
It can help organizations to identify and develop
2. Assess the individual or organization's strengths,
talent.
weaknesses, and career goals.
It can help organizations to build succession
3. Develop a plan to address the individual or
pipelines.
organization's challenges and opportunities.
It can help organizations to create a culture of
4. Implement the plan and monitor progress.
continuous learning and development.
 Application of Career Crossroads
Model on Tata Sons & Cyrus Mistry
if we look at the steps involved in Tata Sons vs Cyrus Mistry case, Tata Sons failed at the second
steps of Career Crossroads Model. Analysing strenghths and wekanesses of Cyrus Mistry we have

Strengths Weaknesses

Strong business acumen lacked experience in managing large

International experience, and complex organizations, and
Strong relationships with Tata Group Did not have a deep understanding of the
stakeholders. Tata Group's culture and values.
 Application of Career Crossroads
Model on Tata Sons & Cyrus Mistry
After having failed in identifying the weaknesses of Cyrus Mistry, Tata Sons consequently failed to
Develop a plan to address Cyrus Mistry’s challenges and opportunities.

What should Tata Sons have done?

Provided Mistry with more opportunities to develop his experience in managing large complex organizations
This could have been done by giving Mistry more responsibility in key areas such as operations and finance
Tata Sons could have also provided Mistry with mentoring and coaching on the Tata Group's culture and values

Overall, the Tata-Mistry case is a cautionary tale for companies that are facing succession planning challenges. It is
important for companies to use a structured approach to succession planning, such as the Career Crossroads Model, to
identify and develop high-potential employees, assess their strengths and weaknesses, and develop a plan to prepare
them for leadership roles.
 A more effective succession planning

Mechanism for
Moral principles Clear standards Well defined process
resolving conflicts

The adoption of
Corporate A set of criteria that
procedures for
governance, A procedure that should have been
resolving
compliance, and involved important explained to all
disagreements and
ethical standards parties to make sure concerned parties
conflicts among
must be strictly it was fair and well- and was based on a
significant parties,
followed in order to understood, such as thorough
such as the board
preserve the the board of understanding of the
and the departing
organization's directors, senior organization's
chairman, would
openness and management, and present and future
have avoided court
confidence. potential successors. needs.
cases and disputes.
 A more effective succession planning

Independent Communication Expert Numerous candidate

governance research companies pool
The adoption of Encouragement of a
In order to retain procedures for A more impartial and wide candidate pool
integrity, it is resolving objective hiring would have
important to have a disagreements and procedure would permitted a more
solid, independent conflicts among have been thorough
board of directors significant parties, guaranteed by using assessment of
with the authority to such as the board executive search potential
monitor and and the departing firms or outside successors, avoiding
influence the chairman, would advisers with individual or political
succession planning have avoided court knowledge of prejudice in the
process. cases and disputes. succession planning. selection process.
Example of long term succession
planning - IBM
In order to succeed Samuel Palmisano as CEO in 2011, IBM developed a long-
term succession strategy. Before receiving her promotion, Rometty had been
employed by the company for 30 years, working her way through the ranks
before landing the CEO post.

Rometty was crucial in this position until her retirement in 2020, and IBM's
succession plan allowed for a seamless handover of authority to Arvind
Krishna, Rometty's replacement. The business was able to preserve continuity
in each circumstance by:
1. creating paths for professional advancement.
2. creating a supportive workplace culture.
3. enabling candidates to compete on an equal footing.

A more practical illustration may be the five-year succession plan for Daniella
Vitale to become CEO of Barneys New York. Before choosing her as the new
CEO, the outgoing CEO had already worked with her for many years and
purposefully provided her with opportunities to advance at Barneys.
THANK YOU