The Tata family, long revered for their brand of classy capitalism and panache when conducting business affairs, is currently facing its greatest leadership crisis ever. Cyrus Mistry's sudden dismissal as chairman of Tata Sons (holding company that controls over 100 operating companies on six continents), has sent shockwaves through India's corporate landscape.
The Tatas have become legendary for their long-term vision in India, where "sagacity or statesmanship" would more appropriately describe them than "business acumen". One could cite their innovative labor reforms (gratuity for workers, eight-hour working shifts and insurance measures for injured or killed workers during employment) even as they expanded into global markets.
Mistry's incident illustrates how Tata family commitment to society is being compromised. For two years now, Tata Sons has been mired in financial uncertainty caused by global slowdown and their debt-laden Corus buyout; their telecom business alone is hemorrhaging $4-$5 billion each day.
Tata Sons has not been able to raise enough funds for investments due to their dependence on dividends and brand royalties, which are tax-exempt in India. The recent move by charity to divert part of this income away will now make Tata Sons subject to distribution taxes, which will reduce overall taxable income by approximately 33% and force them to reduce spending across their businesses.
