When an icon falls - Pratap Bhanu Mehta on the crisis in the Tata group
The crisis in the Tata
group, now made public by the letter of ousted chairman, Cyrus Mistry, is yet
another depressing moment in Indian capitalism’s struggle for social legitimacy.
The Tatas have been, in many ways, an iconic group desperately clinging onto
the few shards of legitimacy that Indian companies can muster these days.
Cynics, particularly after the Radia tapes, have been calling into question the
credibility the Tatas had built over the years. It was, they argued, in the
final analysis, cut of the same cloth as much of Indian capitalism, a fact
largely disguised by a combination of historical legacy, philanthropy, and that
ultimate tool of modernity: Tremendous public relations.
Whether or not this
charge is true, some future historian of Indian capitalism can decide. But the
cynics now have all the ammunition they need. Indian capitalism has always been
short of icons. Another icon has decisively fallen, and with it the promise
that a more enlightened and better capitalism might at least be possible.
Mistry’s letter is
written in self-defence. It will need to be interpreted in that context. Its
factual claims will also have to be adjudicated. But its defensive, matter of
fact style cannot disguise the sheer enormity of what is at stake. The letter
does beg for a semiotic reading of Indian capitalism. Mistry has thrown back
every charge that he possibly could at the company that has ousted him.
The letter alleges
deep procedural improprieties. It raises ethical concerns about the conduct of
the company. It portrays a picture of internal promises frequently broken. It
accuses the company of skirting around regulatory improprieties. It raises
questions about the valuation of the companies. It seems to suggest that
corporate governance accountability is not worth the paper it is written on,
with senior independent members of the board seemingly taking instructions
rather than exercising judgment. The letter is a profound indictment of the
judgment and risk evaluation capabilities of the Tata leadership.
Admittedly, some
business decisions are subject to unexpected setbacks or miscalculation of
risks. But this letter seems to hint at almost systematic misjudgement and
incapacity to account for risk. And to top it all, it is tinged with personal
drama of the kind we are more used to in politics: A titanic figure seemingly
giving up control of an empire, but not really giving it up. Projects were
undertaken not with a view to the long term health of the company but due to
egos writ large. Apart from the Tata group, and its practices, the letter is a
no-holds-barred attack on Ratan Tata himself. It is a kind of takedown you are
used to seeing more publicly aired in politics. After such allegations, what
healing?
This is not the place
to adjudicate the truth of Mistry’s indictment. Nor do we have the full facts.
But whatever emerges in the future, the letter itself may turn out to be a
remarkable document in the history of Indian capitalism. The outgoing chief of
such a large conglomerate has, in his own defence, ended up indicting his own
company, so thoroughly and in public. The issue is not just the fate of the
Tatas. The issue is that in the short run, a letter like this will only deepen
the credibility crisis of Indian capitalism.
The immediate danger,
of course, is that it strengthens the hand of all those state institutions that
operate on the idea that the presumptive distrust of Indian companies’
practices should be even higher. The door has been opened for more intense
regulatory scrutiny of Tata companies. The insinuations now come in writing
from the CEO himself.
The second issue that
will emerge is how much the authority of individual capitalists is able to
override internal and external scrutiny. Perhaps he did not mean to. But the
sum total of Mistry’s charge seems to be that there was little countervailing
force against Ratan Tata’s business decisions, whether it be Nano or airlines.
For anthropologists of capital, this is an interesting moment: A portrayal of
capital, not operating on the cold logic of calculation, but on the basis of
personality. Charisma and authority, even here, seem to silence rationality.
The third issue is
that Indian companies, despite corporate governance reform, are analytically
quite opaque — even the best of them. It is not exactly a secret that Indian
companies are the hardest entities to write about analytically in the public
domain. This is not just true of “investigative” cases where some wrongdoing is
alleged and where journalists risk defamation suits. It is also true of bread
and butter analytics of companies and business plans. Of course, even the best
laid business plans can go wrong, circumstances can change, risk assessments
can involve honest mistakes. But Indian companies are rarely held up to solid
analytical scrutiny.
What is striking about
Mistry’s letter is the way it punctures holes in the assumptions about one
business model after the other, in ways you think an informed media might have
done. In principle, this should not matter, since you assume investors,
creditors and so forth are doing their due diligence. But in business, as in
politics, reputations can have their own self-fulfilling effects. And this is
exactly what Mistry suggests.
To Indians cynically
suspicious of capital this story has all the elements of schadenfreude. The
idea that any company can institutionalise processes that reflect integrity is
chimera. The only difference is between companies which manage to successfully
draw a veil over the inner working and ones that don’t. For those who take the
view that India needs a more mature capitalism that with all its faults can
unleash some productive energy in Indian society, this is a depressing story.
The social legitimacy of any institution is in the final analysis, not a
function of ideology or beliefs. It is a function of credibility, which is
often judged through icons.
Indian capitalism,
with rare exceptions, has been lacking those icons. That the Tata controversy
has felled one more is an indication that the social legitimacy of Indian
capital will erode even more. The issue is not the competing world views of
Mistry or Tata. It is the long shadow of suspicion this controversy will cast
over Indian capital.
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