Tatas break up power pyramid
The Tatas have officially formalised the separation of the Church and State. Shareholders of Tata Sons — the holding company for the $128 billion Tata group — have apparently approved a proposal to amend the Articles of Association (AoA).
As a result, the Tata Trusts and Tata Sons will have separate chairmen. This is a structure that already exists: Ratan Tata is the chairman of the Tata Trusts while N. Chandrasekaran heads Tata Sons. Until 2012, Ratan Tata was the chairman of both the Trusts and the holding company.
He gave up his executive responsibilities at the group when he turned 75. The power-sharing principle is being formally incorporated in the AoA to ensure that no one in future ever gets to straddle the Trusts and the holding company. The resolution was passed at the 104th annual general meeting (AGM) on Tuesday.
Tata Sons is the principal investment holding company and promoter of Tata companies. The philanthropic trusts hold 66 per cent of its equity. Article 118 of the AoA dealt with the process for the appointment of the board chairman.
Tata Sons had received a request from the Sir Dorabji Tata Trust and Sir Ratan Tata Trust — the principal Trusts — to make the amendment which said “provided that a person who is chairman of either the Sir Dorabji Tata Trust or the Sir Ratan Tata Trust or both, will not concurrently be eligible to be the chairman of the board of directors”.
According to the AGM notice issued by Tata Sons, for the purpose of selecting a new chairman of Tata Sons, a selection committee will be constituted (in accordance with provisions of Article 118) to recommend the appointment of a person as the chairman of Tata Sons. It added that the Tata Sons board may appoint the person as the chairman of the board of directors, subject to Article 121, which requires the affirmative vote of all directors. The same process will be followed for the removal of a chairman.
Trusts to call shots
The revised AoA further said the selection committee will comprise three persons nominated jointly by Sir Dorabji Tata Trust and the Sir Ratan Tata Trust who may or may not be directors of Tata Sons, one person nominated by and from amongst the Board of Directors of Tata Sons, and one independent outside person selected by the Board.
The chairman will be selected by the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust. The quorum for a meeting of the selection committee will be the presence of a majority of members nominated jointly by the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust.
Here, the resolution clarified that the world “nominated jointly’ will mean that the two trusts shall jointly decide the nominees. In case of any difference of opinion, the decision of the majority of the Trustees of the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust will prevail, the AGM notice said.