The Tata Sons succession crisis that shook India Inc could be due to Cyrus Mistry’s lack of clarity on “degree of freedom” to take decisions, according to an expert on family business. K Ramachandran, executive director of Thomas Schmidheiny Centre for Family Enterprise and faculty of IIM-A and ISB, felt that it appeared that Cyrus Mistry lacked clarity of freedom to take decisions.
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“My feeling, I don’t know.. they had clarity on degree of freedom the new chairman had like on this area you can take decisions and on these you cannot…or criteria for taking decisions…it appears they didn’t have it,” he said on the sidelines of the FICCI FLO’s discussion on family business.
He also apprehended that there could have been a mismatch between what the board of trustees or predominant shareholders ‘expected’ of Mistry and what actually the ousted chairman did. Reacting to the issue indirectly, Apollo Hospitals vice-chairperson Preetha Reddy emphasised on importance of the board than individual.
“The board governance has to play an important role. When you have banks and shareholders you need to empower the board. As we move along, the board governance has to become more and more important for shareholders’ rights,” she said.
Ramachandran also suggested that he (Cyrus) could have assumed certain things but the board of directors thought differently. The professor thinks that an institutional process was lacking in the affair. Ramachandran does not think only a member of the family owning a company is required for the succession.