Tata has taken a first step towards redemption after a demoralizing boardroom brawl. IT whizz Natarajan Chandrasekaran will be the new chairman of the $100 billion cars-to-salt conglomerate. He is the closest thing to an outsider to hold the top job at the group’s holding company, Tata Sons. The appointment gives the group a realistic shot at fixing thorny governance issues. He can also help his own successor at key unit Tata Consultancy Services in the event the United States cools on crucial work visas.
WATCH VIDEO | Natarajan Chandrasekaran Named New Chairman Of Tata Sons
Chandrasekaran signals both change and continuity. He does not have significant investor relationship with the holding company, whereas the family of ousted predecessor Cyrus Mistry holds an 18 percent stake in Tata Sons.
That stake is second only to the charitable trusts led by group patriarch Ratan Tata – the man who hired then effectively fired Mistry, setting off a spat in which Mistry publicly railed against Tata management. Chandrasekaran is also the first to hold the position who does not hail from the tight-knit Mumbai Parsi community.
Yet he also knows the group intimately. He served as chief executive of crown jewel Tata Consultancy since 2009, and sales almost quadrupled under his watch. The software company is now India’s largest by market value. Given the boardroom spat, and uncertainty over how much power a new chairman might really wield given Ratan Tata’s influence, it would have been tough to find an outsider as respected as Chandrasekaran.
The new boss has a long to-do list to earn the market’s respect. He needs to credibly address the alleged governance lapses outlined by Mistry. That may require resetting Tata Sons’ relationship with its investors, and revamping the board of the holding company, which looks too cosy altogether.
He will also need to support his successor at Tata Consultancy, where Chief Financial Officer Rajesh Gopinathan will take the helm. The outsourcing firm is grappling with poor top line growth and worries that US worker visas could dry up under the immigration-sceptic administration of Donald Trump.
The American market accounts for around 60 percent of revenues for Indian outsourcers; leaving Gopinathan to sink or swim would be inadvisable. Chandrasekaran is a decent choice at a difficult time for the Indian giant.