TCS CEO N. Chandrasekaran appointed Tata Sons chairman

Mumbai: Natarajan Chandrasekaran, 53, will be the new executive chairman of Tata Sons from 21 February, the holding company of the $103 billion group announced on Thursday. Chandrasekaran, who has spent his entire career at Tata Consultancy Services Ltd (TCS), is currently the managing director and chief executive of the software maker.

He will take over the role at a time when the group is embroiled in a battle against its ousted chairman Cyrus Mistry to protect its reputation.

“At the Tata group, we are at an inflection point,” said Chandrasekaran in an emailed statement after his elevation. “I am aware that this role comes with huge responsibilities. It will be my endeavour to help progress the group with the ethos, ethics and values that the Tata group has been built on.”

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Chandrasekaran and Jaguar Land Rover CEO Ralf Speth were inducted on the board of Tata Sons on 25 October, a day after the board ousted Mistry and named his predecessor Ratan Tata as interim chairman, kicking off a feud which has now reached the National Company Law Tribunal.

At that time, the board had named a selection committee to pick Mistry’s successor within four months. Chandrasekaran was picked within 12 weeks of Mistry’s ouster, unlike the previous time, when the selection panel took about 18 months. He is only the third non-Tata after Nowroji Saklatwala and Cyrus Mistry, the first non-Parsi and the seventh chairman to head the 150-year Tata group.

Starting at TCS as a software programmer in 1987, Chandrasekaran was co-opted on the TCS board and named chief operating officer in September 2007. As COO, he drove TCS’s acquisition strategy. Two years later, in October 2009, he was elevated as CEO and managing director. When he rose to the top at the age of 46, he became one of the youngest CEOs in the Tata group. Under Chandrasekaran, TCS has grown revenues at about 24% annually and its market capitalization stands at Rs4.6 trillion.

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TCS has also accounted for at least 70% of Tata Sons dividends in the past three years, which would have worked in Chandrasekaran’s favour. “Mr. Chandrasekaran has demonstrated exemplary leadership (at TCS). We believe he will now inspire the entire Tata group to realise its potential acting as leaders in their respective businesses, always in keeping with our value system and ethics and adhering with the practices of the Tata group which have stood it in good stead,” the Tata Sons board said in an emailed statement.

He was unanimously chosen, it added.

The selection committee to pick the chairman had five members: Ratan Tata , interim chairman; Venu Srinivasan, chairman of the TVS group; Amit Chandra, managing director of Bain Capital; ex-diplomat Ronen Sen; and Sushanta Kumar Bhattacharyya, founder of the Warwick manufacturing group.

A Tata group spokesperson didn’t say whether the holding company was looking at creating the position of vice-chairman, adding that it was the prerogative of the board and the new chairman to do this.

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Chandrasekaran “ticks two very important boxes” for the role of the chairman, said Morgen Witzel, author of Tata: The Evolution of a Corporate Brand. The first is the international experience that he has with TCS. Around 67% of the Tata group’s revenue comes from overseas operations.

“Secondly, he has been part of the Tata group for many years and well aware of group’s values and ethos and knows the ‘Tata way’ of doing things. An outsider would have lacked an understanding of the much needed Tata value and culture,” said Witzel.

The Tatas have accused Mistry of just that, although, at least in terms of shareholding—his family owns a little over 18% of Tata Sons—he is anything but an outsider. Last week, Tata Sons called for a shareholder meeting on 6 February to eject Mistry from its board of directors, a position which he has held since 2006. Tata Sons and its ousted chairman have been trading charges after Mistry accused the group of corporate governance violations. He also alleged that the Tata Trusts, the ultimate owners of the group, excessively interfered in the workings of the group, charges which have been refuted.

“The immediate challenge for Chandrasekaran will be to assure investors that better governance practices would be set in place and working toward enhancing reputation of the group,” said Shriram Subramanian, founder of proxy advisory firm InGovern Research. Another challenge “will be not to be seen as a Ratan Tata yes man”.