Trust Ownership of the Tata Group

The Indian Tata Group is one of the largest and most admired business groups in the world. It has 28 listed subsidiaries and more than 80 operating businesses. It has shown strong financial performance and social responsibility for decades. Interestingly, it has a unique ownership structure: the main holding company Tata Sons Limited is majority-owned by charitable trusts. We examine the governance of this remarkable entity. The Trusts own 66% of Tata Sons, the main holding company of the Group, while members of the founding Tata family are very small minority shareholders. The governance structure is characterized by managerial distance between trusts and Group companies. The Trusts are almost exclusively concerned with philanthropy, and according to the Articles of Association of Tata Sons Limited, their governance role is limited to nominating two members to the Selection Committee which recommends the Chairman of the company’s Board of Directors. Group companies are independently managed, but there are significant cross shareholdings and a member of the founding family, Mr Ratan Tata, chairs the Trusts, holding companies and major subsidiaries. Mr. Cyrus P Mistry, Managing Director of the Shapoorji Pallonji Group, a minority shareholder in Tata Sons, is to succeed Mr. Ratan Tata as chairman of Tata Sons in 2012. Trustees in the major Trusts are paid nominal fees of as little as $10 and $20 a year.