Tata panel to steer hunt for Ratan’s successor

5-Member Team To Pick Head Of $70-B Group Before Dec 2012

THE search for a successor to Ratan Tata gathered momentum after India's biggest conglomerate said a five-member panel would select its next chairman. Mr Tata, 72, head of the $70-billion salt-to-software group, who has built the world's cheapest car and has taken the group global, will step down in December 2012, creating a vacancy for the what is widely regarded as the top job in corporate India. The statement from Tata Sons, the group's holding company, said the five-person panel included what it described as one "external member". It did not name them.
Two of the five represent two trusts that are major shareholders of Tata Sons, while two are directors of Tata Sons, according to people close to the development.
The trusts, named after Ratan Tata and Dorabji Tata, are major shareholders of Tata Sons. Tata Sons owns majority of TCS, India's largest software maker, and has large holdings in companies such as Tata Steel and Tata Power.
Tata Group veteran NA Soonawalla, who is a member of the Ratan Tata and Dorabji trusts, is part of the panel, people close to the development said. RK Krishnakumar, the vice-chairman of Tata Tea and Indian Hotels, and a director of Tata Sons, is representing the group holding company. There is speculation that Keki Dadiseth, the former director of Unilever, could also be on the panel.
    "Other directors such as Arun Gandhi, R Gopalakrishnan, Ishaat Hussain are not part of the panel," said a top Tata group executive. Mr Tata would act as a mentor to the panel, the people said. He is believed to have consulted prominent leaders like Henry Shacht, ex-global CEO of Cummins, and Agnellis of Fiat.
    There is no clarity on the identity of the external consultant. The name of a prominent management guru is doing the rounds.
    The successor would be chosen based on his ability to grapple with the complexities of a globalised environment, according to the Tata Sons statement. "It would certainly be easier if that candidate were an Indian national. But now that 65% of our revenues come from overseas, it could also be an expatriate sitting in that position with justification now," Mr Tata had said in an interview with the Wall Street Journal.
    There has been speculation about the chances of Arun Sarin, the former boss of Vodafone PLC, and Indra Nooyi, the current CEO of PepsiCo. "You might want an Indian who has worked outside India. This is a great international business," said Nigel Nicholson, professor, department of organisational behaviour, London Business School. Noel Tata may still get top job
    AT THE helm since 1991, Mr Tata has led a spectacular international foray, resulting in 65% of the group's revenues coming from abroad. In 2007, Tata Steel paid $13 billion to buy Anglo-Dutch steelmaker Corus, while Tata Motors paid $2.3 billion to acquire Jaguar Land Rover the next year. In all the Tata Group's 98 operating companies have annual revenues of $71 billion and 357,000 employees, according to its website.
    The selection process for a prospective candidate would consider suitable persons from within the Tata companies, other professionals in India as well as persons overseas with global experience, said the release. "It is expected that the final selection would be made in adequate time to effect a smooth transition and change of leadership before Ratan N Tata's retirement at the end of December 2012."
    The group is also talking to international consultants in its search for a successor.
    Tatas, like GE, are a large conglomerate with even a more complex web of companies, so they need a leader of the stature of Jack Welch to steer it, according to an official with a global search firm.
    The decision to choose the successor through a panel casts some doubt over the elevation of Mr Tata's halfbrother Noel as the successor. It was widely speculated that Noel Tata's recent appointment as head of Tata International was precursor to the younger Tata's likely ascension to the top job.
    Some Tata Group observers feel Noel Tata is still a strong contender for the post, considering the fact that he is the only person who can take the Tata legacy forward. "There will be resistance to bring someone from outside. Noel will be eventually chosen. The panel gives a legitimacy to the succession plan," said an investment banker close to the Tata Group.
    Ratan Tata's great grandfather Jamshetji Nusserwanji Tata, born to a Parsi family in Navsari, Gujarat, founded the group. Dorabji Tata succeeded Jamshetji as the chairman of the Tata group. JRD Tata, who is considered as the architect of modern business in India, took the group to greater heights.
    The recent spate of global acquisitions has resulted in expatriates getting the top job at group companies. The head of Tata Motors is now a former GM official. It remains to be seen if the top job goes abroad.
    Mr Nicholson says that an insider might eventually win out. "Outsiders are most needed when you want a radical change of direction or to revitalise the culture. Here, I see the emphasis is most likely to be on continuity — this is a brilliant family business. It sends a strong signal of faith in the culture to appoint an internal successor, but never if it compromises on quality. You have to have good people."