'Chandra Has Taken Right Professional Decision At the Right Time'

While the latest trigger for him stepping down could be the uncertainty around his renewal as a director at the AGM, which is otherwise a routine matter, Chandra may have been contemplating quitting for some time now because of the overall turbulence with the principal shareholder on the leadership issue.

For N Chandrasekaran, who sent out a letter announcing his exit as the Tata Sons chairman to the board of directors at 11 am on Wednesday, the last six months may not have been easy.

The short letter, summarising all the important points in four paragraphs, captured it.

'It has been six months since that board meeting, and no resolution has been reached till date,' he wrote to the board members of Tata Sons and followed up with a media statement.

Chandrasekaran (Chandra as he's popularly called) was recalling the February 24, 2026, Tata Sons board meeting where Tata Trusts chairman Noel Tata had expressed reservation over granting him a third term citing losses in some Tata group companies.

This is after Noel Tata had endorsed a Trusts resolution recommending another full term to Chandra as executive chairman.

'The proposal was not carried through because one of the board members did not support it, and in the absence of unanimous support, I chose to defer the decision,' Chandra summed up without naming Noel Tata.

Many of the Tata stocks remained under pressure, reacting to the development. Businesses and governments across the world were taken by surprise on Wednesday morning as the news of Chandra's exit flashed on TV and mobile screens.

At the centre of everything was the $400 billion Tata conglomerate with businesses ranging from software to aviation, steel to semiconductor.

At Bombay House, the Tata Sons headquarters, it was a full day for Chandra, who has said he would not offer himself for reappointment as chairman when his term comes to an end on February 20, 2027, asking the board and the shareholders to decide on succession.

'Tata Sons is a very large institution and there are many strategic projects that are under critical stages of execution. It is not only necessary to have a leader in place to lead the group beyond February 2027, but also clarity on leadership is important for employees, investors, partners and other stakeholders,' the letter stated.

A townhall was quickly arranged in the afternoon at Bombay House, where Chandra has occupied the fourth floor corner room for almost a decade now.

At the townhall, he interacted with the staff, who were not prepared for this news. He also attended the Tata Motors board meeting in the same building located in the Fort district of Mumbai.

Some 10 km away at the Trent office in Wadala, Noel Tata was busy with other meetings through the day. Elsewhere, many of the Tata Trusts executives, it is learnt, were also taken by surprise by Chandra's announcement.

Tata Sons Begins Search for New Chairman

They were planning for a Tata Trusts board meeting on Thursday, now with a changed agenda. Originally, Chandra's renewal as a director on the board of Tata Sons was scheduled for the August 13 meeting.

Now, the focus would be on the process of setting up a search committee for a new Tata Sons chairman, sources said.

As of now, there's no clarity on the August 18 annual general meeting (AGM) of Tata Sons which was considering voting by shareholders for Chandra's renewal as director, following retirement by rotation.

Chandra, now 63, was appointed chairman of Tata Sons in February 2017, after Cyrus Mistry was removed from the post in a boardroom coup of sorts on October 24, 2016.

In his letter on Wednesday, Chandra said he had spent 40 years with the Tata group. He joined as the Tata Sons boss after serving as chief executive and managing director of Tata Consultancy Services for eight years.

While the latest trigger for him stepping down could be the uncertainty around his renewal as a director at the AGM, which is otherwise a routine matter, Chandra may have been contemplating quitting for some time now because of the overall turbulence with the principal shareholder on the leadership issue, according to sources.

R Gopalakrishnan, author and former executive director at Tata Sons when Ratan Tata was the chairman, told Business Standard that Chandra had taken "the right professional decision at the right time".

He explained, citing Chandra's letter, that if in six months a decision couldn't be taken on leadership, there's no point leaving things to the last moment.

Going forward, Gopalakrishnan suggested good governance and succession planning at Tata Sons.

A source who did not want to be identified said it was clear over two Tata Sons board meetings, in February and June, that Chandra had the support of four out of five board members.

"But whatever the reasons, they were restrained from voting," he said.

"There have been very few examples in corporate history that a chief executive with the fullest confidence of his board is compelled to leave because of extraneous pressure," the source added.

Since the Tata top executives' retirement age is capped at 65 years, Chandra's age also turned out to be a contentious issue.

One of the ways for him to continue as Tata Sons chairman would have been to get two years as executive chairman and the remaining three as non-executive chairman.

Ratan Tata too had slipped into a non-executive role after 65, but he took a series of strategic decisions in that phase, including marquee investment in the Anglo-Dutch steel company Corus.

Proxy advisors too shared their views on the top leadership change announcement at Tata group.

Amit Tandon, managing director at Institutional Investor Advisory Services, while referring to the personal equation between two individuals as well as the relationship between Tata Sons (a for-profit organisation) and Tata Trusts (a non-profit body), suggested a long-term structural solution rather than a personal fix in the current context.

According to Shriram Subramanian, founder and managing director at InGovern, "misalignment" between the views of Tata Sons and Tata Trusts caused the problem.

When asked about the need to list Tata Sons as a solution, Subramanian pointed out that listing is for a different purpose -- catering to the regulatory side and bringing liquidity to minority shareholders.

While listing may not be the ultimate answer to resolve all the turmoil at the Tata group -- that has even forced Cabinet ministers to intervene in the recent past -- it would bring in much needed transparency and accountability in the system, according to a source in favour of listing Tata Sons.

In the Tata group, various stakeholders hold different views on listing of the holding company.

Even as the Reserve Bank of India had in 2022 mandated listing for upper layer non-banking financial companies (NBFCs) within three years, there's no clarity on the matter yet despite Tata Sons being named an upper-layer NBFC.

Even as Noel Tata is opposed to the listing of Tata Sons, the two vice-chairmen of Tata Trusts -- Venu Srinivasan and Vijay Singh -- have spoken in support of listing earlier this year.

With a listing, nominee directors from Tata Trusts could lose their veto power over key appointments, dismissals, investments and other strategic decisions.

The second largest shareholder at Tata Sons, Shapoorji Pallonji, has been vocal about the need for listing.

As for Tata Sons, its earlier stated position was against a listing. In the recent past, it has refrained from making any public statement on the matter.

Amid uncertainty about the listing of Tata Sons, Chandra's sudden decision to step down is believed to be a reason for concern, not just within the Tata group but the corporate world, and the government as well.

Feature Presentation: Aslam Hunani/Rediff