When an icon falls

Issue is not just the fate of Tatas. A letter like Mistry’s could deepen the credibility crisis of Indian capitalism.

Written by Pratap Bhanu Mehta | Updated: October 28, 2016 4:03 pm
cyrus mistry, cyrus mistry mail, cyrus mistry tata group, cyrus mistry tata sons, chairman cyrus mistry, cyrus mistry email, india news Cyrus Mistry’s letter is written in self-defence. It will need to be interpreted in that context.

The crisis in the Tata group, now made public by the letter of ousted chairman, Cyrus Mistry, is yet another depressing moment in Indian capitalism’s struggle for social legitimacy. The Tatas have been, in many ways, an iconic group desperately clinging onto the few shards of legitimacy that Indian companies can muster these days. Cynics, particularly after the Radia tapes, have been calling into question the credibility the Tatas had built over the years. It was, they argued, in the final analysis, cut of the same cloth as much of Indian capitalism, a fact largely disguised by a combination of historical legacy, philanthropy, and that ultimate tool of modernity: Tremendous public relations.

WATCH VIDEO: Following Cyrus Mistry’s Ouster, Tata Group To Shortlist Candidates For Next Chairman

 

Whether or not this charge is true, some future historian of Indian capitalism can decide. But the cynics now have all the ammunition they need. Indian capitalism has always been short of icons. Another icon has decisively fallen, and with it the promise that a more enlightened and better capitalism might at least be possible.

Mistry’s letter is written in self-defence. It will need to be interpreted in that context. Its factual claims will also have to be adjudicated. But its defensive, matter of fact style cannot disguise the sheer enormity of what is at stake. The letter does beg for a semiotic reading of Indian capitalism. Mistry has thrown back every charge that he possibly could at the company that has ousted him.

The letter alleges deep procedural improprieties. It raises ethical concerns about the conduct of the company. It portrays a picture of internal promises frequently broken. It accuses the company of skirting around regulatory improprieties. It raises questions about the valuation of the companies. It seems to suggest that corporate governance accountability is not worth the paper it is written on, with senior independent members of the board seemingly taking instructions rather than exercising judgment. The letter is a profound indictment of the judgment and risk evaluation capabilities of the Tata leadership.

Admittedly, some business decisions are subject to unexpected setbacks or miscalculation of risks. But this letter seems to hint at almost systematic misjudgement and incapacity to account for risk. And to top it all, it is tinged with personal drama of the kind we are more used to in politics: A titanic figure seemingly giving up control of an empire, but not really giving it up. Projects were undertaken not with a view to the long term health of the company but due to egos writ large. Apart from the Tata group, and its practices, the letter is a no-holds-barred attack on Ratan Tata himself. It is a kind of takedown you are used to seeing more publicly aired in politics. After such allegations, what healing?

This is not the place to adjudicate the truth of Mistry’s indictment. Nor do we have the full facts. But whatever emerges in the future, the letter itself may turn out to be a remarkable document in the history of Indian capitalism. The outgoing chief of such a large conglomerate has, in his own defence, ended up indicting his own company, so thoroughly and in public. The issue is not just the fate of the Tatas. The issue is that in the short run, a letter like this will only deepen the credibility crisis of Indian capitalism.

The immediate danger, of course, is that it strengthens the hand of all those state institutions that operate on the idea that the presumptive distrust of Indian companies’ practices should be even higher. The door has been opened for more intense regulatory scrutiny of Tata companies. The insinuations now come in writing from the CEO himself.

The second issue that will emerge is how much the authority of individual capitalists is able to override internal and external scrutiny. Perhaps he did not mean to. But the sum total of Mistry’s charge seems to be that there was little countervailing force against Ratan Tata’s business decisions, whether it be Nano or airlines. For anthropologists of capital, this is an interesting moment: A portrayal of capital, not operating on the cold logic of calculation, but on the basis of personality. Charisma and authority, even here, seem to silence rationality.

The third issue is that Indian companies, despite corporate governance reform, are analytically quite opaque — even the best of them. It is not exactly a secret that Indian companies are the hardest entities to write about analytically in the public domain. This is not just true of “investigative” cases where some wrongdoing is alleged and where journalists risk defamation suits. It is also true of bread and butter analytics of companies and business plans. Of course, even the best laid business plans can go wrong, circumstances can change, risk assessments can involve honest mistakes. But Indian companies are rarely held up to solid analytical scrutiny.

What is striking about Mistry’s letter is the way it punctures holes in the assumptions about one business model after the other, in ways you think an informed media might have done. In principle, this should not matter, since you assume investors, creditors and so forth are doing their due diligence. But in business, as in politics, reputations can have their own self-fulfilling effects. And this is exactly what Mistry suggests.

To Indians cynically suspicious of capital this story has all the elements of schadenfreude. The idea that any company can institutionalise processes that reflect integrity is chimera. The only difference is between companies which manage to successfully draw a veil over the inner working and ones that don’t. For those who take the view that India needs a more mature capitalism that with all its faults can unleash some productive energy in Indian society, this is a depressing story. The social legitimacy of any institution is in the final analysis, not a function of ideology or beliefs. It is a function of credibility, which is often judged through icons.

Indian capitalism, with rare exceptions, has been lacking those icons. That the Tata controversy has felled one more is an indication that the social legitimacy of Indian capital will erode even more. The issue is not the competing world views of Mistry or Tata. It is the long shadow of suspicion this controversy will cast over Indian capital.

The writer is president, CPR Delhi and contributing editor, ‘Indian Express’

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First Published on: October 28, 2016 12:04 am
  1. S
    Sadanand Patwardhan
    Oct 28, 2016 at 7:34 am
    Worshipping False Icon. When did Indian Capitalism have Credibility? The crony capitalism that made merry in India had hyped up Tata's Respectability as a fig leaf to hide shame, which was severely dented when Ratan Tata was found conversing in Niira Radia tapes. Moreover, foundation of Tata Empire rested on the Fortune of DRUG Money made during Britain's 19th Century deable Opium Wars on China.lt;br/gt;lt;br/gt;Incidentally, Is "It accuses the company of skirting around regulatory "improprieties"", Good or Bad? If "Improprieties" are skirted around {are left untouched}, it would be a good thing. Why would Mistry accuse Good of Tata's at this stage?
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    1. A
      Abhinav
      Oct 28, 2016 at 1:21 am
      Writing anything against TATAs is literally 'namak ' (pun intended!). Analysis is good but it suffers from the present day media malice of jumping the gun too quickly before anyone else could. But of course view in present is bound to be different from rearview analysis of future.lt;br/gt;For one I think he is discounting the mood of the Indians which is pro development/ capitalism and therefore impact of this incident will depend on many factors including the PR by company and media narratives.
      Reply
      1. K
        K SHESHU
        Oct 28, 2016 at 1:50 pm
        It is not just a crisis of capitalism but also a crisis of ' capitalusts' who, as Marx said, ' digging their own grave...'
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        1. K
          kamalakanta
          Oct 29, 2016 at 6:22 pm
          1. The first few years of Ratan Tata as chairman was not praiseworthy.lt;br/gt;2. Ratan Tata inherited the legacy of JRD Tata and fubctional Head as Darbari Seth etc.lt;br/gt;3. Is Ratan Tata a businessmen or politician ? He did politics alongwith Budhadeb Bhattacharjee. His involvement in Neera Radia case is a great question.lt;br/gt;4. Lt Dhirubhai Ambani who did not inherited an empire like Ratan Tata , but made the greatest business house of India. He never utilized photogenic face regularlylt;br/gt;5. The empire of Dhirubhai Ambani expanded in verticals only and too much business in different field made GVK, LANCO. GMP, JP group, Punj Lloyd made beggar and defaulter to PSU banks. Loan of Tata Group is much bigger than that of Mallya.
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          1. A
            ashok s
            Oct 28, 2016 at 1:27 am
            This not question of values. Business is business and it means find breakthrough in any country s govt policy and make money. Now what has happened is clashes of ego's . tata works on emotional basis and mistry on practical basis. Mistry found some businesses done by former chairman were deep sinking on coffers of company and wanted a change but this was likened by earlier boss who has majority stake , actually he is the one real boss for lifetime, coz that damaging his clean image. So it is clearly a fight of ego ,image, emotions, etc . it is minority shareholders to decide their future either to stay or be out .
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            1. K
              khabri
              Oct 28, 2016 at 12:12 am
              The writer is hyperventilating in this article as if TATA is the only company which has these issues! Take any iconic company and s can be punched in them by the tons. So this has nothing to do with TATA. I would say they are still better than most - 99.9%. Want names Volkswagen, D Bank, Siemens, Citibank, Apple, all have paid multi billion dollar fines or are facing litigations etc.
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              1. B
                Bishnoi
                Oct 28, 2016 at 2:50 am
                OMG! The writer is acting like a real moron. If tomorrow Modi fires Jaitley, Nusli Wadia fires Varun Berry, Mukesh Ambani fires Anand Jain....or for that matter Sameer Jain fires Arnab Goswami all of them will come out and do quack quack....it is the nature of weak and immature men to quack quack but if someone takes this and does further quack quack like this author, it is so irritating and moronic.
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                1. D
                  Davinder Chahal
                  Oct 28, 2016 at 1:30 pm
                  are you bring clarity to your reader or complicating the matter ???????. lt;br/gt;before reading this i was very clear about the issue related to tata's but after reading this i got confused ...become irritated because i lost some what clarity i have ....lt;br/gt;lt;br/gt;what a good article... keep it up ..we need persons like you .. who discourage their own reader to not read your article.... lt;br/gt;you should learn latin and greek ....it will be very helpful in writing best article.. best of luck..!!!!!!!!
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                  1. D
                    Dr. A
                    Oct 28, 2016 at 7:30 am
                    Excellent, as usual. Just two thoughts: why did Mistry, as the CEO for 4 years, not rectify these major issues internally? Because if he did, surely, he would have quoted those minutes as well! Second, a more general one - great or new innovations begin only in the face of "strong" countervailing evidences. So called process driven business strategies are for making what is already a success more efficient - not for creating anything new. Nano was a new concept. lt;br/gt;I would highly appreciate enlightenment on both the above points.
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                    1. K
                      Karan Thakur
                      Oct 28, 2016 at 4:06 pm
                      Only in India.
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                      1. N
                        nitin
                        Oct 28, 2016 at 4:14 am
                        Anybody who peddled the Rs.1 Lakh car myth and product is a moron.lt;br/gt;Ratan Tata has proven himself to be one . lt;br/gt;What kind of id1ot would try to sell a terrible car below it's cost price ?
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                        1. H
                          harun
                          Oct 28, 2016 at 5:54 am
                          Ratan Tata is solely to blame for the Mess the Tatas find themselves in.lt;br/gt;lt;br/gt;Corus/Tata Nano/Vistara are gonna bleed the Tatas and their credibility.lt;br/gt;lt;br/gt;Mistry was pragmatic and decided that these White Elephants must be done away.lt;br/gt;lt;br/gt;Any such decision was a direct ault on the 21 year legacy of RATAN TATA.
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                          1. M
                            M MD
                            Oct 28, 2016 at 2:31 am
                            ANY COMMENT BY FORMER CEO IS HYPROCRICY. SO FOR HE WAS PART OF lt;br/gt;DECISIO N.OW IS WASHING DIRTY LINEN IN PUBLIC. THIS IS PART OF CORPORA TE GOVERNANCE. THERE IS NO CORPORATE GOVERNANCE INIDIA. IT IS JUST LIKE RIVATELY OWNED UNIT AND IT IS JUST TO GET FUNDS FROM PUBLIC LMIITED COMPANIES ARE FLOATED. ITIS CONTROLLED BY SPONSORS THROUGH BOARD OF DIRECTORS
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                            1. A
                              ashok
                              Oct 27, 2016 at 10:50 pm
                              If the Tatas are down to using the likes of Suhel Seth to buttress their PR, they seem to have fallen on hard times indeed.
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                              1. H
                                HILARY
                                Oct 28, 2016 at 9:00 am
                                Business in any country has always a strong element of fraud and lack of integrity in built into it. When caught, in recent times, so-called reputed companies like JPMorgan Chase, Goldman Sachs and Volkswagen, to mention a few, have paid enormous fines running into billions of dollars after admitting to wrongdoing. I have cited only three important examples there are dozens of others and the fines levied by the regulators run into trillions.
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                                1. H
                                  HILARY
                                  Oct 28, 2016 at 7:16 am
                                  It is time for Tata Sons to have a professional chairman who is nobody's son or son-in-law.
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                                  1. H
                                    HILARY
                                    Oct 28, 2016 at 7:15 am
                                    The writer has forgotten the Nitesh Thakur episode and the crores paid to him ostensibly for the purpose of land aggregation. What kind of integrity was that?
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                                    1. M
                                      M Shankar
                                      Oct 28, 2016 at 2:54 pm
                                      TATA's should have been more graceful in the way they have shown the door to their Chairman. Mr Mehta gave a different and important perspective, 'the credibility of icons'. A fight back from Mistry was expected. Somehow, one gets a feeling that he was not given a chance to explain himself. It appears as if it is an internal coup. If the affairs within TATA , who have a clean corporate image ( at least till now), are as murky as Mistry claims them to be, what to talk about other companies!
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                                      1. M
                                        Mayuri Choudhary
                                        Oct 28, 2016 at 9:07 pm
                                        Love it when commies keep dreaming and spouting their Marxist nonsense.
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                                        1. M
                                          media
                                          Oct 28, 2016 at 3:17 am
                                          Mistry was doing his job --- cleaning the mess left behind his predecessor ratan tata whose true rotten core has finally been unveiled. Mistry's family has 18% stake in the tata companies so naturally he wants them to be profitable. That's why he opposed the airline idea which he was basically arm twisted by tata to agree, airline industry is a loss making deal in India. That's why he tried to get rid of corus the british steel company as soon as he could --- tatas ignored the fact that everywhere in the west with expensive labor steel companies were being driven out of business by cheap Chinese steel yet he bought this hugely expensive company and buried tatas under gigantic debt. All the profit made by TCS the cash cow of tatas was wasted in such ventures. Including Nano which was idealistic but they dived into it without any preparation without any research and development to develop a decent car, not the one which kept exploding and which was more expensive to manufacture than to sell. tata sees himself as a visionary --- but it is like Mungeri Lal ke Hasin Sapne --- just whimsical and foolish. ideas with no legs. Ford were trying to off load their loss making jaguar-land rover business, guess who came to rescue them --- mr. tata. Maybe they have turned around the fortunes of jaguar/land rover but still all this laden Tatas with so much debt that Cyrus Mistry was trying to fix. He didn't get much time to clean the stables after decades of bad decisions. Four years is nothing, tata board should have given him more time. Indian media sucks up to the rich and powerful in India. The truth about the rich and powerful never sees the light of the day if it is damaging to them. I don't know what slavish mentality Indian media and public have that they believe everything that is projected as true. Media is always showing ratan tata as some kind of saint which he most definitely is not.
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                                          1. P
                                            Parth Garg
                                            Oct 28, 2016 at 8:42 am
                                            The author seems to be a hardcore optimist to say that Indian capitalism still enjoys credibility among the mes..
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