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Appointing family member to succeed Tata is prudent, says expert

By Rashmi Kumar

Appointing a family member to succeed Ratan Tata is a “prudent decision” and will have none of the “dangerous effects of nepotism”, according to Kavil Ramachandran of the Indian School of Business.

The Thomas Schmidheiny Chair Professor of Family Business and Wealth Management told CampdenFB that the Tata Group was simply “entrusting responsibility in the hands of someone who will take the journey forward and stabilise the company with caution”.

His comments follow the Indian conglomerate’s appointment of Cyrus Pallonji Mistry as the deputy chairman, with the aim of taking over as chairman of the Tata Group in December next year.

“Mistry is not likely to rob the ship or lose the wealth of the company. He has been tested during his five years serving as a board member and has the potential to run the business,” added Ramachandran.

The son of the single largest shareholder of the group, Mistry has been on the board of the family’s holding company since 2006. A company statement said that he will be working with Ratan over the next year before succeeding to the top position of the $83 billion (€61.9 billion) family business, whose diverse operations range from salt production to manufacturing cars.

Mistry’s sister is married to Ratan’s half-brother Noel, who had appeared to be a strong contender to take over. Ramachandran reckons that the final decision was “surprising but good”.

“The selection panel had the clear criteria of choosing someone who understood the group’s values and orientation, and Mistry fits in with the culture.”

Speculation about who would succeed Ratan was rife since a five-member committee, which included 43-year-old Mistry, was formed more than a year back to find a suitable candidate. Ramachandran says that after much deliberation, the panel realised that the best contender was one among them.

“They needed someone young who had time ahead to build the group further. In the global scenario too, the average age of chief executives is dropping, and this appointment was very carefully made. The group size is much bigger than before – operating competence is not key now, but the challenge will be consolidation and protection of the base,” added Ramachandran.

One of CampdenFB’s top 50 family business leaders, fifth-generation Ratan has led the company, founded in 1868 by his great-great-grandfather as a small firm trading in cotton, since 1991.