Late last year, I wrote about the Tata Trusts in India as a model of family ownership with a purpose: two charitable trusts, which, together with other smaller trusts and family-related entities, hold about 66 percent of the corporate behemoth known as Tata Sons.
The trusts steer the profits of a close to $360 billion industrial group toward philanthropy. I suggested East African family businesses could learn from it.
This month, that structure is being tested in public, and the lessons are as painful as watching two porcupines hug.
A few weeks ago on August 12, the Tata Sons board chairman, N Chandrasekaran, told the board that he would not be renewing his term, which ends on February 20, 2027.
The Trusts accepted his decision the next day and began looking for a successor. Two weeks ago, at a September 17 board meeting in Mumbai, the board prevailed upon him to stay and voted four to one to reappoint him for five more years. The lone dissenter was Noel Tata, chairman of the Tata Trusts and one of its nominees on the board.
The Trusts have called the board resolution “a legal nullity” as the Tata Sons’ articles of association require the support of Trust-nominated directors to appoint or reappoint the chairman, and that support was absent. Well, the truth of the matter is that the Trusts have two nominees on the board.
One, Noel Tata, voted against keeping the chairman. The other nominee it would appear, chose the highway to boardroom hell.
The governance question is simple. A chairman who announced his departure and was then reappointed over the objection of the shareholder holding two-thirds of the company must ask whether he truly holds a mandate.
A four-to-one board vote satisfies the arithmetic, but a chairman ultimately serves with the confidence of the owners. It is also critical to mention that Tata Sons is a private limited company, which then leads to the second issue, the potential public listing.
In October 2021, the Reserve Bank of India (RBI) introduced scale-based regulation for non-bank financial companies, sorting them into layers by size, complexity and systemic importance. Tata Sons was placed in the upper layer on September 30, 2022, and such companies must list on a stock exchange within three years.
The logic is that entities big enough to matter to the financial system should meet public-market disclosure standards, including published quarterly results and shareholders who can ask questions. Tata Sons missed the September 2025 deadline after applying to surrender its core investment company registration, and on September 11, 2026, the RBI rejected that application.
The Trusts’ resistance is about control and purpose. Special rights in its articles of association give Trust-nominated directors affirmative say (the Trusts have to give specific consent) over key decisions, and those protections would be hard to keep in a listed company.
Noel Tata has argued that listing would “strike at the heart” of the philanthropic ownership model and leave Tata Sons answerable to investors who want returns.
The Trusts have proposed instead to buy out the Shapoorji Pallonji Group’s roughly 18 percent stake, reportedly for no less than 25,000 crore, about $2.6 billion.
The Shapoorji Pallonji Group is the Mistry family’s construction and real estate conglomerate, and the largest shareholder in Tata Sons after the Trusts. The late Cyrus Mistry, who chaired Tata Sons from 2012 until his ousting in 2016, was its scion. The group, understandably, favours a listing that would give it a market-determined price.
Shortly after the controversial keep-the-chairman vote, the board also voted to move toward listing, again with Noel Tata alone in opposition. The implications for a family-controlled or trust-controlled company are serious.
Once listed, a company’s articles are rewritten around public shareholders. Transfer restrictions loosen, special rights face scrutiny, and the owner’s influence is exercised through votes rather than nominated directors. Was that the primary reason the board voted to keep the chairman, which was to help shepherd the listing process that the Tata family was dead set against?
Which brings me to the point for East African readers. Families often hesitate to appoint independent or professional directors, and this saga shows why. Independent directors are meant to exercise judgement in the best interests of the company, not on instruction from the owners. When their judgement differs from the family’s, the family discovers a board can outvote its owner on the two questions that matter most: who leads, and whether to go public.
Owners who want independent boards, and the credibility they bring, must decide in advance which decisions they delegate and which they reserve. Reserved matters belong in writing, in the articles and a shareholders’ agreement, before the first disagreement.
Tata’s lesson is not that independent boards are dangerous. It is that a family wanting to straddle both the independence and control horses must specify exactly where one ends and the other begins. More on this unfolding saga next week.