Tata Sons: Alignment before authority

A chairman can win a vote. He cannot lead against the people who own the company.

This article was first published in Forbes India on September 29, 2026; https://www.forbesindia.com/amp/article/column/tata-sons-alignment-before-authority/2998854/1

On September 17, the board of Tata Sons voted to give N. Chandrasekaran another five years as chairman. Four directors said yes. One said no. The one was Noel Tata, who chairs the Tata Trusts that own about two-thirds of the company. Five weeks earlier Chandra had said he would not seek another term. The board asked him to reconsider, and he agreed.

A four to one vote usually settles a matter. This one did not. The Trusts say the resolution is void, and they are preparing to go to court.

Why one vote stopped a board

The Articles of Association of Tata Sons give the Trusts more than a shareholding. They allow the Trusts to nominate one-third of the directors. And they require that any decision needing a board majority also carry the affirmative vote of a majority of those nominee directors.

The Trusts have two nominees on the board today. Noel Tata voted against the reappointment. Venu Srinivasan, the other nominee, voted for it. One out of two, the Trusts argue, is not a majority, so the resolution fails. Tata Sons argues that a one-one split is exactly the tie that the chairman’s casting vote exists to break. That is now the legal question.

It need not have arisen. The Trusts had three nominee directors until Vijay Singh stepped down in September 2025, and the third seat has been empty since. With three votes there would have been a majority one way or the other. With two, the owner was able to deadlock itself.

A structure that assumed agreement

This is what happens when an ownership structure is designed for harmony. The Articles give the Trusts a veto in the boardroom. They say nothing about what happens when the Trusts cannot agree among themselves. There is a casting vote for a divided board and no tie-breaker for a divided owner.

And the owner here is not a person. It is a board of trustees, and it has been split for a year. The seat that is empty today became empty because the trustees could not agree on renewing Vijay Singh. Mehli Mistry left weeks later. A day before the Tata Sons board met this month, one of the Trusts wrote to Venu Srinivasan asking him not to vote on the proposed listing of Tata Sons. He declined, saying his duty as a director was to the company. That is a fair reading of company law. It is also the moment the owner’s two voices became public.

Tata is not unusual in this. Most Indian promoter structures run on veto rights, reserved matters and unwritten understandings. They work while everyone wants the same thing. Very few of them say what to do when the owners are divided, which is the only time they are needed.

Office without a mandate

Chandra now holds the office without the owner’s backing. He may be right in law and still find that he cannot use his authority. The decisions that matter at Tata are long ones. A semiconductor plant. An aircraft order. A large acquisition. A dividend policy, which is also what funds the Trusts’ hospitals and universities. None of them can ride on a contested resolution. Executives will hedge. Every future decision carries the same question mark, because if one appointment can be declared void, so can the next.

Nor does the argument stay in the boardroom. It has already reached the regulator, the courts and the front pages, where narrow legal questions get answered and the direction of a group does not. The Trusts will pay for that too. Their grants depend on the profits of the companies below them.

Memory cuts both ways

The Tata Group knows this story. Cyrus Mistry became chairman in 2012. What he thought the Group needed and what the Trusts wanted were never reconciled. The difference simmered for four years, ended in his removal in 2016 and was followed by nearly five years in court. Whatever one’s view of the merits, the Group paid in reputation, in management attention and in time.

Institutional memory is one of Tata’s greatest strengths. It tells people how to act when there is no rulebook. But it is also a record of what not to repeat. Only the configuration has changed. In 2016, the board and the owner were aligned and the chairman was not. In 2026, the board and the chairman are aligned and the owner is not. The result is the same. A chairman without the alignment of his owners cannot lead, however capable he is and however valid his appointment.

The group level is still opaque

Writing on the Mistry episode in 2017, I had observed that “while Tata group companies individually are recognized for good governance and transparency, the organization at group level turns out to be quite opaque.” Nine years on, the fault line has not moved.

It shows in how this dispute is being fought. Questions have now been raised in the press about a business arrangement involving the chairman’s family and a company connected to one of the Trusts’ nominees, and whether the board was told about it. The facts may well be explained. What is telling is the route. In a listed company, a relationship of that kind is declared, examined by independent directors and disclosed. Here it arrives through a leak in the middle of a fight. The Reserve Bank has told Tata Sons to list. That will not settle who runs the Group, but it will end this particular kind of secrecy.

What has to happen now

A court can decide whose reading of the Articles is correct. It cannot make an owner and a board agree. Only they can do that, and both of them know what the alternative costs.

The Trusts need to settle their own position first, fill the seat they have left empty, and say plainly what they expect of Tata Sons over the next five years. The board and the chairman need a mandate the owner has signed, not only a resolution that has been passed. Both need to write down what a nominee director is for, and what happens when the nominees disagree, so that the next split does not become the next crisis.

The Tata Group remembers how to stand by its people in a crisis. It must now remember what it cost the last time its owner and its chairman parted ways. The price will be higher this time, and it will be paid in public. The courts can tell Tata who is right. Only alignment can decide who leads.

Family Businesses as a Pillar of Viksit Bharat

This article was first published in the Economic Times on January 29, 2026; https://economictimes.indiatimes.com/news/company/corporate-trends/family-businesses-as-a-pillar-of-viksit-bharat/articleshow/127759602.cms?from=mdr

Introduction: The Missing Big Idea

In a recent letter to the Finance Minister published in the Times of India, Duvvuri Subbarao, former governor of the Reserve Bank of India, posed a question that goes to the heart of India’s economic moment. If Viksit Bharat is the overarching vision of this government, what does it mean in concrete terms, and how are annual budgets aligned to that vision? Drawing a parallel with Manmohan Singh’s landmark 1991 budget, where the “big idea” was liberalisation, Subbarao asks what the equivalent organising principle is today.

This article argues that one such pillar of Viksit Bharat must be explicitly recognised and supported: India’s family businesses. The objective here is twofold. First, to situate family enterprises historically and empirically as engines of nation building. Second, to outline what the Finance Minister can do, through policy and budgetary choices, to enable family businesses to contribute responsibly, transparently, and sustainably to India’s development journey.

Family Businesses and Nation Building: A Historical Constant

Family businesses are the oldest and most enduring organisational form across nations. In India, family enterprises have long been builders of physical infrastructure, educational institutions, healthcare systems, and local employment. At India’s current stage of development, where the need for infrastructure, patient capital, and institution building is acute, these characteristics matter deeply.

History offers a useful parallel. In the late nineteenth and early twentieth centuries, the United States witnessed massive infrastructure creation led by business families such as the Vanderbilts, the Carnegies, and the Rockefellers. Railroads, steel, oil, and finance were shaped by families willing to take long-term risks at scale. These families helped build the economic foundations of modern America.

India today stands at a comparable inflection point. Large family-controlled business groups are deeply involved in roads, ports, renewable energy, logistics, manufacturing, education, and healthcare. These are sectors where long gestation periods and intergenerational commitment are advantages rather than liabilities.

Lessons from the Robber Barons

Yet history also cautions us. Many of the American families who built that infrastructure later came to be labelled “robber barons”. Some lost legitimacy due to concentration of power, weak governance, opaque practices, and an inability to manage succession effectively. Several family empires fragmented or faded, not because of lack of wealth, but because institutions did not evolve alongside scale.

This is a lesson India must take seriously. The choice is not between celebrating or constraining family businesses. The real policy challenge is to fuel entrepreneurial energy while embedding governance, transparency, and meritocracy. Without this balance, family capitalism risks public backlash and private decline.

Why Family Businesses Matter for Viksit Bharat

If Viksit Bharat is about sustained prosperity, social stability, and institutional depth, family businesses are uniquely positioned to contribute in four ways.

First, they provide patient capital. Family owners are often willing to invest across cycles, absorb short-term volatility, and commit to long-horizon projects that are unattractive to purely financial investors.

Second, they anchor local economies. Family enterprises are embedded in regions and communities, making them critical to employment generation, skill formation, and social cohesion.

Third, they enable institutional philanthropy. Many of India’s educational and healthcare institutions have been built by business families, often long before corporate social responsibility became mandatory.

Fourth, they ensure continuity. In a world of rapid managerial churn, family ownership can provide strategic consistency, provided governance systems are robust.

Policy Lessons from Other Economies

Across several jurisdictions, governments are beginning to recognise family enterprises as distinct economic actors whose long-term orientation and ownership continuity require tailored policy responses. As documented by Tharawat Magazine , this shift reflects an understanding that family businesses contribute disproportionately to employment, capital formation, and institutional stability, yet face structural vulnerabilities during succession and ownership transition that generic corporate policy does not address. The emerging response is not to privilege family firms indiscriminately, but to make them visible within the policy architecture.

This recognition has taken different institutional forms. In the United States, the creation of a bipartisan Family Business Caucus within Congress signals an effort to ensure that family enterprises are explicitly considered in legislative and regulatory debates. In Poland and Canada, legal and tax reforms have focused on reducing the cost and complexity of intergenerational transfers, acknowledging that poorly managed succession can destroy productive capacity and jobs. In the United Arab Emirates, a dedicated Family Companies Law, supported by state-backed institutions, seeks to codify governance, succession, and dispute resolution mechanisms, positioning family firms as long-term partners in national economic strategy. Hong Kong, meanwhile, has focused on building an ecosystem around family capital and family offices, combining regulatory adjustments with investments in institutional capacity for stewardship and legacy planning.

What unites these diverse approaches, as Tharawat Magazine underscores, is a move away from treating family ownership as incidental. Instead, policy frameworks increasingly aim to align continuity with governance, transparency, and professionalisation. The lesson for India is not to replicate any one model, but to recognise that if family businesses are to anchor Viksit Bharat, they must be deliberately integrated into policy design, fiscal incentives, and economic measurement, rather than remaining an invisible yet systemically important segment of the economy. 

Policy Recommendations

If robust family businesses are to be a measurable pillar of Viksit Bharat, policy intent must translate into administratively actionable and fiscally grounded measures.

First, formal recognition of family enterprises: The Union Budget can announce a formal definition of family businesses, notified jointly by the Ministry of Finance and the Ministry of Corporate Affairs. This would allow family enterprises to be recognised as a distinct category for policy design, without creating a new regulatory burden. Budget documents can mandate periodic data collection through MCA filings, enabling evidence-based policymaking.

Second, governance-linked fiscal incentives: Under the Direct Tax framework administered by the Central Board of Direct Taxes, targeted deductions or concessional tax treatment can be offered to family enterprises that meet specified governance benchmarks. These may include independent directors, documented succession plans, audited family constitutions, and separation of ownership and management. This aligns tax policy with long-term institutionalisation rather than short-term compliance.

Third, succession and continuity financing: The Budget can create a dedicated Succession and Continuity Credit Window, routed through public sector banks and development finance institutions. Backed by partial government guarantees, this facility would support ownership transitions during generational change, preventing distress sales, fragmentation, and employment loss. This intervention sits squarely within the Ministry of Finance’s financial stability and credit flow mandate.

Fourth, targeted public expenditure for family-led nation building: Capital expenditure allocations for infrastructure, education, healthcare, and energy transition can explicitly prioritise public–private partnerships anchored by long-term family ownership. Viability gap funding and concessional finance can be linked to governance and transparency standards, ensuring that public funds support stewardship-oriented capital rather than short-term extraction.

Fifth, next-generation capability development: Budgetary support can be provided under skilling and higher education heads, in coordination with the Ministries of Skill Development and Entrepreneurship, and Education, for structured leadership and governance programmes tailored to next-generation family members. Treating succession as a national economic continuity issue reframes it from a private family matter to a public interest concern. 

Measuring Progress: Integrating Family Business Health into Economic Reporting

If Viksit Bharat is to move beyond aspiration, it requires metrics embedded in official economic reporting. One such metric should be the robustness of India’s family business ecosystem.

The Finance Ministry can mandate the creation of a Family Business Development Index, published periodically alongside existing economic indicators. This composite index could track intergenerational survival rates, governance quality, professional management penetration, employment contribution, reinvestment rates, and participation in national priority sectors.

Such reporting would serve three purposes. It would signal that stewardship-based capitalism matters to India’s development vision. It would create incentives for business families to institutionalise governance and succession practices. And it would give policymakers an early warning system for stress in a segment that employs millions and anchors regional economies.

Conclusion: A Call for Early Attention

Embedding family businesses as a pillar of Viksit Bharat will not happen overnight. It may not be feasible to incorporate many of these ideas in the forthcoming budget. Policy design, inter-ministerial coordination, and institutional alignment take time.

But that is precisely why the conversation must begin now. As an early set of ideas for the next budget cycle, this article urges the Finance Minister to take notice. If India wants development that is durable, inclusive, and institutionally sound, it must look closely at the families that build, own, and steward its enterprises.

Viksit Bharat will not be built by capital alone. It will be built by families who think beyond one generation, supported by policies that reward responsibility as much as ambition.

SHARE PLEDGING AND ITS CONSEQUENCES: A STUDY OF INDIAN FIRMS

“Policy makers and investors need to take a more balanced and contextual view on share pledging by family promoters rather than castigating the phenomenon.”

A research study, authored by Dr. Nupur Pavan Bang, Professor Sougata Ray, Nandil Bhatia and Professor Kavil Ramachandran of the Thomas Schmidheiny Centre for Family Enterprise at the Indian School of Business (ISB), highlights the prevalence of share pledging in the Indian context and the possible implications that pledging may present for stakeholders, especially in family firms.

Using data for 1,492 firms listed on the National Stock Exchange of India from 2009 to 2019, the study finds a decline in firm value, higher crash risk and underinvestment in innovation by firms where promoters of family firms pledge their shares. The study also shows how some firms have utilized share pledging by family promoters as a tool to raise capital for strategic projects and create value for the stakeholders.

The various scandals, loss of control of the firm by family promoters, regulatory responses and warnings led to the common perception that all share pledges by promoters are bad. Existing empirical research around pledging of shares is sparse and does not account for the heterogeneity among the possible use-cases of capital obtained from pledging of shares. The study calls for more nuanced studies on pledging to explore this anomaly contextually and to avoid painting all cases with the same brush.

Co-author, Professor Sougata Ray explains that “the commonly peddled negative narrative on pledging often dissuades fact based, informed, balanced, and nuanced debates on its utility, causes and consequences, backed by rigorous research in spite of its ubiquity in India and many other economies of the world. Along with large sample data driven research, there is a need for case study based research on pledging in order to understand the variations of the same.”

The study was released in a webinar in the presence of Dr. Satyanayana Chava, Founder and CEO, Laurus Labs; Professor Prasanna Tantri, Executive Director, Centre for Analytical Finance, ISB; the authors of the study; and industry stakeholders. It has important implications for investors, regulators, board of directors, and even family members. Pledging of shares, coupled with bad decision-making and/or over ambitious growth plans, resulted in complete destruction of family wealth in many family firms. There is need to create awareness and build stronger family governance processes that would put checks and balances with regards to excessive pledging.

Speaking at the webinar, Dr. Nupur Pavan Bang said, “The study provides a clarion call for acknowledging that pledging is an important tool to access financial capital for family promoters. It is a legitimate way to raise entrepreneurial financing amongst family businesses and a source of fund to turnaround the family firm if it is in trouble. Policy makers and investors need to take a more balanced and contextual view on share pledging by family promoters rather than castigating the phenomenon.”

The study lists important implications for stakeholders of family firms, such as, promoters, family members of the promoting family, investors, the firm’s board of directors, and the regulators. A few of them include:

-        Over-optimistic investment plans and over-pledging of shares by the promoters, without pre-planned repayment strategies, are likely to lead to a crisis later.

-        Investors must keep a track of their portfolio and regularly evaluate if the controlling shareholders of the firms in which they have invested have pledged their shares.

-        Board of directors of firms must caution controlling shareholders from over pledging their stakes and should shield the firm from such shareholders if they try to manage the margin calls by taking hasty or short-term view decisions in the firm.

-        The study also has insights for the regulators such as the RBI and SEBI to take more balanced view of pledging when making policies.

-        Further, there is need to create awareness and build stronger family governance processes that would put checks and balances with regards to excessive pledging.

Directors’ competencies: A tall order for India Inc

This article was first published in the Economic Times on August 08, 2021. Co-author: Kavil Ramachandran; https://economictimes.indiatimes.com/news/company/corporate-trends/directors-competencies-a-tall-order-for-india-inc/articleshow/85202226.cms

Recent discussions on the failure of corporate governance and how independent directors (IDs) can be effective have raised concerns about the qualifications and competencies of independent directors (IDs). The implicit message is that IDs with “lower” competencies may be failing in their responsibilities as the custodians of the overall interests of stakeholders. Do the directors of India Inc possess such competencies? Are these competencies enough? Further to the recent order of SEBI related to IDs, in this article, we examine the competencies of the Board of Directors (BoDs) of firms listed on the NSE, as measured by educational qualifications of the directors. We recommend the need to have other criteria for determining competencies of IDs.

Qualifications

As per data from Primeinfobase, 93.75 per cent of directors of firms listed on NSE are at least graduates. Majority of the directors (69.08 per cent) have post graduate technical qualifications. MBA is the single most popular degree at 26.56 per cent directors being management graduates- 16.27 per cent of them from the IIMs. CA, CS, ICWA or LLB come a close second at 24.38 per cent while 21.21 per cent of the directors are engineers. A few of them even have an MBBS degree (1.17 per cent). However, instances of corporate governance failures even at large corporations in India have highlighted that despite the highly qualified pool, corporate governance is wanting. Therefore, qualification does not necessarily mean a good fit. 

Diversity

More effort needs to go into identifying the right people who are a) at least in sync with the latest developments in their own areas of expertise, if not ahead of them, b) are not rubber stamps and not afraid of voicing their opinion, and c) bring diversity to the board discussions. Composition of the board is very important. A board that comprises all engineers or all MBAs or all CAs, while highly qualified, will have no diversity. Similarly, it should also evaluate the requirements of the firm depending on the life cycle that it is at. 

Values

Infosys co-founder Narayana Murthy once openly spoke about his spat with the first non-promoter CEO of Infosys, Vishal Sikka. “If the core values of Infosys such as “leadership by example, fairness, transparency, accountability” were “thrown to the dust, then you have to stand up and voice your anguish and disappointment”, he said. The BoDs need to possess similar attitude or value systems and the skills to be independent, so that they can voice their opinion when needed. Values of a person is not easy to assess and for the regulator to implement. But, SEBI can put some guidelines or conditions for the large corporations to start with, say companies with Rs 10,000 crore plus in revenue, where at least the IDs must have a dossier compiled to confirm that they have demonstrated their independence in thinking and acting, before being inducted into the board. 

Commitment

Often, IDs hold multiple board positions, advise various organizations, and are even associated full time with their own businesses or are employed somewhere. With so many other activities claiming their time and mind space, they may not devote enough time to fulfil their board duties in spirit. It is in the interest of the firm to demand time and guidance from the directors. Hilti Corporation, known for its values, culture, innovation and governance, demands that the board members devote a minimum of 20 days every year to Hilti affairs. In Hilti, a board member’s time commitment could extend up to 40 days if he or she is involved with the executive board, employee activities or any special projects. The remuneration flexibility that SEBI has mentioned in their regulation should make it easier for the firms to pay adequately to the BoDs. 

Conclusion

In essence, there has to be a change in mindset while companies are determining who their IDs should be. SEBI’s order included a more elaborate and transparent process to be followed by nomination and remuneration committee while selecting candidates for appointment as IDs. The amendments also enhanced disclosures regarding the skills required for appointment as an ID and how the proposed candidate fits into that skillset. Determining the “skills required” is tough yet doable. Detailed background check including demonstrated commitment to the practice of values will help create a pool of IDs with the right compentencies. Corporate governance and society’s wealth will be the losers if this challenge is not addressed soon. Industry champions must work with SEBI to set a new threshold for anybody to qualify to be an ID. As Ludmya "Mia" Love, American political commentator and the first black person elected to Congress from Utah and the first black woman elected as a Republican, says, “Difficult things aren’t easy, but they’re worth it."