The massive Tata fiasco

Jokes and headline floating around at Diwali eve: “Shortest Termination letter ever...TATA”; “Mistry ends, Mystery begins”. The net result is the erosion of Rs. 26,000 crores in market capitalization of the company. A fourteen month long intricate selection process, followed by a sudden termination does not bode well for a company that is “India Incorporated” for the rest of the world. And, as an executive rightly stated, “They are TATAs, not Ambanis who wash their dirty linen in public!”

Yet the linen did reach public dhobi-ghats and the mudslinging did start.

Once upon a time…

A company founded before independence soared high in the sky with Air India built on strong pillars of a steel giant, which soon went on to acquire an ailing British car manufacturing company and a Brazilian steel giant. The steel king or rather the Jewel in the company crown, decided to handover the company’s reins to a young and hardworking prince of real estate world, to fly it further. The dream seems to have crash landed and the Prince has lost his kingdom, to the erstwhile King of good times.

This story has the following characters: The Indian company – Tata Sons, the British company – Jaguar and Land Rover, The Brazilian giant – Corus, The new aviation companies – Air Asia and Vistara, The Prince – Cyrus Mistry and the Jewel – Ratan Tata.

Cyrus Mistry - head of Shapoorji Pallonji group which owns real estate construction company bearing the same name, Eureka Forbes, engineering goods, power and textile manufacturing companies - is a very reserved personality. His father Shapoorji Pallonji Mistry vacated the TATA Sons board for him and, his Pallonji Trust by virtue of its equity ownership is the third largest shareholders in the Tata Group. This made the selection of Cyrus Mistry, albeit after a rigorous process, a valid one to head Tata Sons.

What went wrong...

Cyrus Mistry was never a dynamic leader and found himself sidelined by the Tata Sons’ board many a time for his strategic decisions, which he now claims were to reduce the heavy debt of the group. The Tata Group allegedly has debts close to $18 billion, a number that is equivalent to many countries’ GDP. The write-off of such a huge amount has sent alarm bells ringing in PMO (Prime Minister’s Office) and in Stock Exchanges and in SEBI (Securities Exchange Board of India). The way Cyrus Mistry handled the Tata DoCoMo issue was also not to the liking of Ratan Tata. (more details on TataDoCoMo issue can be found amongst our previous blogs)

As another executive stated that “Cyrus Mistry is a construction leader, not a constructive one!” So in fact, there was much angst about the way he worked and about the way he conducted business. Question arises about whether Cyrus loses his leadership of other Tata Group companies as well or just Tata Steel. The Tata Group has kept its quiet for most of the issues, claiming that dragging issues into public is definitely not their style and against the very ethos of TATA values.

Things will be laid to rest and with the resignation of former TCS chief Ramadorai as chairman of govt’s skill development agencies, rumours are abound that he may head Tata Sons as its new chairman replacing Rata Tata, who himself is an interim chairman after the ouster of Cyrus Mistry. (HT Business, Nov 2, 2016)

The corporate saga continues and we see another one bite the dust! But it’s the Tatas we are talking about. They will rise from the ashes like phoenix.

- Monica Mor, Sr. Faculty, INLEAD

The Mistry of Sacking

The board of TATA Sons, on Monday, decided to sack Cyrus Mistry, who had been serving as the Chairman at India’s largest conglomerate, thereby sending the entire Indian business community into a state of shock. Ratan Tata himself would be the interim chairman till they find a suitable replacement for Mistry. Non-performance and undermining TATA group’s value system are being touted as possible reasons for the ouster; however, the real reason for Mistry’s sacking remains to be a mystery. While this unprecedented move could spark a battle between two of Mumbai’s oldest business families that share very close ties (the Mistrys own about a fifth of TATA Sons), here’s a look at some famous sackings of the world:

1. Walt Disney

At the mere age of 18, Walt Disney was fired from his first animation job at the Kansas City Star newspaper. His editor cited his “lack of imagination and good ideas” as the reason. Disney then acquired Laugh-O-Gram, an animation studio but drove it into bankruptcy. After moving to Hollywood with his brother, they started up the Disney Brothers’ Studio, and eventually created Mickey Mouse and Disneyland. As a film producer he received 22 Academy Awards from 59 nominations and went on to win more individual Oscars than anyone else.

2. Steve Jobs

Not many know that Jobs was fired from Apple, the company he cofounded in 1984. He was in his 30s and Apple had just announced the revolutionary “new” Macintosh with a mouse and first ever Graphical User Interface (GUI) on a commercially sold computer. However, at $2500, the computer was hard to sell. Jobs wanted to go ahead and spend more money on the Macintosh, but his board wanted to focus on the older but more successful Apple II. He was fired by the then CEO of Apple, John Sculley. By 1997 Apple was a sinking ship and was going through a huge financial crisis. Its competitor Microsoft had launched Windows 95 and was taking the tech world by storm. Apple needed a better operating system with modern features and flopped for one run by Steve Jobs’ new company called NeXT. Talks were initiated between the two companies and finally Apple acquired NeXT for 427 million dollars. Steve Jobs joined Apple under the title of an advisor and rest is history.

3. Thomas Edison

Edison always conducted experiments while working at Western Union. During one of his night shifts in in 1867, he was experimenting with batteries when he spilled some sulfuric acid that ate through the floor and onto his boss’ desk below. The next morning he was fired and went on to invent the phonograph, the motion picture camera, and the ever-lasting, practical electric light bulb.

4. JK Rowling

Rowling worked as a secretary for the London office of Amnesty International, but dreamt of becoming a writer. She secretly wrote stories on her work computer and daydreamed about a teenage wizard named Harry Potter. Her employers finally got fed up, giving her the boot.  Getting fired helped kick-start her true ambitions and she wrote the first Harry Potter book shortly after getting canned. Her severance check helped support her over the next few years. Today, she's a multi-billionaire author, having penned one of the most successful book series of all time.

5. Louis van Gaal

Even the sports fraternity has not remained untouched by high profile canning. Louis van Gaal was sacked as the Chief of the Manchester United Football Club within 48 hours of his side winning the FA Cup, beating Crystal Palace 2-1. The club claimed that van Gaal was let go because ManU had played poorly that year, scoring only 49 league goals, failing to qualify for Champions League, and finishing fifth in the Premier League table.

By: 

Sumit Chakravarty

Faculty - INLEAD