Tata’s leadership change is an opportunity, not a crisis

While N Chandrasekaran’s (Chandra) decision to not seek reappointment for a third time was not unexpected, it has caused some disquiet. Shareholders in listed Tata Group companies need not panic. The operating companies are strong businesses, have strong leadership and well-established boards. The immediate impact of this decision is limited at best. For the listed companies that Chandra chairs, a transition will be made once a successor has been appointed.

For the listed companies, Chandra has had a successful run; they have grown in size and profitability, capital has been infused and unlocked by reducing the level of cross-holdings. The group has also started investing in tomorrow’s businesses.

The concerns are more at the level of Tata Sons — large losses from the aviation and digital businesses, the challenges of the semiconductor foray, its contentious relationship with RBI with respect to its listing, among others.

A leadership change at the helm of Tata Sons is not entirely a surprise. The media has reported skirmishes among the trustees of the Tata Group and between Chandra and some members of the Tata Sons’ board — all of which had the potential to impact Chandra’s reappointment. If for nothing else, a successor would have had to be identified soon enough — Chandra is about two years away from reaching Tata Group’s mandatory retirement age for executive directors.

The Tata Group has six months to find a successor. Under Indian law, succession planning is the mandate of the Nomination and Remuneration Committee and of the board. In Tata Sons’ case, however, a Selection Committee must be formed — the process has already been initiated by Sir Dorabji Tata Trusts — for the appointment of the Chairperson of Tata Sons. The Selection Committee must comprise three members nominated jointly by Sir Dorabji Tata Trust and the Sir Ratan Tata Trust, one from among Tata Sons’ Board, and one independent outsider; the Committee’s own chairman is chosen by the Trusts from among their nominees; and quorum requires a majority of the Trust nominees.

The appointment of a successor now requires a fresh perspective. The ideal candidate must possess deep relationships across the bureaucracy, ministries, and regulatory bodies; demonstrate proven experience in leading large conglomerates; and exhibit a strong appetite for risk. At the same time, this individual must be capable of navigating an increasingly complex global environment shaped by geopolitical uncertainties and rapid technological advancements that are redefining the way we live and work. This is a tall ask, not just for the individual, but also for the Selection Committee.

This must be seen as an opportunity by the group to build further longevity. The Tata group has a unique holding structure, with philanthropies as the ultimate parent. For the Group to truly outlive individuals, it must place its trust in seasoned professionals — both at the executive and board levels of Tata Sons — while safeguarding its core philosophy of responsible citizenship. Defining the mandate, responsibilities, and deliverables of the Chairperson of Tata Sons will be central to this effort.

Equally, Tata Sons must also evolve its operating style. Its silence is no longer acceptable in the age of social media. The group’s continued lack of response to controversies has allowed the narrative to be controlled by others, slowly denting its image and brand as a reputable, well-governed group known for its contribution to society and the larger societal cause.

Leadership transitions at the Tata Group have historically been fraught with contention, each shaped by its own circumstances. N Chandrasekaran’s decision to not seek a third term may be less divisive, yet his successor will inherit a new set of challenges. The most pressing among them will be to reconcile differences, reimagine the Group’s structure, and chart a path that secures both stability and renewal. In doing so, the Tata Group has the chance not merely to manage succession, but to redefine its legacy for generations to come.

Dalal is President and COO, and Tandon Managing Director of Institutional Investor Advisory Services India Limited