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.
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.