Tata structure shortchanges its investor-charities

Tata Motors

21/08/2026 13:00

The author is a Reuters Breakingviews columnist.  The opinions expressed are her own.
By Shritama Bose
MUMBAI, Aug 21 (Reuters Breakingviews) - India's most respected conglomerate has an opportunity to take an important step forward. In a bid to improve governance, charitable trusts controlling the $280 billion Tata salt-to-IT group formally split ownership from management in 2022 by giving Tata Sons, the unlisted holding company, its own chair. The fractious departure of the latest person to hold that position, N. Chandrasekaran, suggests the reform fell short. If the trusts' ultimate goal is to maximise income to fund their philanthropic mandate, they should resist reimposing central control and give the next chair greater authority.
Set up by founder Jamsetji Tata in 1892, the Tata Trusts are a cluster of charities aiming to advance social and economic development. Their activities, ranging from building hospitals to sponsoring sports in India's hinterland, are financed through dividends drawn from their 66% stake in Tata Sons. This income grew more than 11-fold during the four years ended March 31 to 29.4 billion rupees ($307.24 million). The charity work, and the founder's insistence that Tata group companies look after employees to a high standard, has made its brand synonymous with public service. 
In the long term, however, indirectly owning large or majority stakes in some 31 companies ranging from $87 billion Tata Consultancy Services TCS.NS to $18 billion Tata Motors TATM.NS may not be the best way for the trusts to fund their mission. A true arm's-length separation between the charities and the holding company, with the latter making minority investments like a pension or sovereign fund, may be more lucrative.  
The current structure is the worst of all worlds because it has allowed the trusts to cling onto power. The two main charities don't just nominate one-third of directors on Tata Sons' board, they also hold veto rights over its decisions. Any investment of more than 1 billion rupees ($10.45 million) gets kicked up to the board, a threshold so low that the charities have the final say over most spending. 
As a result, the trusts have someone to blame if they don't like performance but are not delegating enough power for the holding company chair to maximise returns. It has led to bizarre decisions that jeopardise the charities' future income, such as the purchase of struggling carrier Air India from the government. By contrast, the not-for-profit foundation Robert Bosch Stiftung has no influence on the strategic or business orientation of Germany's Bosch despite owning 94%. 
Tata is much more complex and no corporate structure is immune to boardroom clashes of the sort that culminated in Chandra's exit. The root of his departure revolved around a unique disagreement over whether to list the holding company, which would fundamentally change the group's structure. Nonetheless, now that he's on the way out, the trusts have an opportunity to reflect on how best to fulfill their philanthropic mandate. 
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CONTEXT NEWS
Tata Trusts, the charities controlling India's Tata group of companies, said on August 13 that trustees of the Sir Dorabji Tata Trust have passed a resolution to set up a selection committee to recommend a new Chairman for Tata Sons. N. Chandrasekaran on August 12 said he would not offer himself for a third term as chair of Tata Sons, citing the absence of unanimous support from the board for his re-appointment.

(Editing by Una Galani; Production by Aditya Srivastav)
((For previous columns by the author, Reuters customers can click on BOSE/shritama.bose@thomsonreuters.com))