Cyrus Mistry's exit: Tata corporate brand takes a beating with boardroom battle

Experts say the impact is limited to investors and potential employees and may ease out in the next few months

The 148-year-old Tata Group, India's largest and among its oldest conglomerates, is in the middle of a boardroom battle quite unlike what it has seen this far. On Monday, the group's chairman, Cyrus Mistry, was sacked from his position, and his predecessor Ratan Tata reinstated for now.

In the intervening time, there have been statements and counter-statements made by both sides. Not all of them have been pleasant, with Mistry claiming he was a "lame duck chairman" and Tata saying that his words were "unforgivable".

The falling out between Tata and Mistry, one a member of a much-respected business family and the other the son of the largest single shareholder in the Tata group, has taken many by surprise.

Brand experts say the episode is unfortunate.

"This could have been handled in a far better way. There has been an impact and I would pin it on to the trust one has had in the Tata brand. I think that has been shaken up a bit," N Chandramouli, CEO, TRA, which brings out the annual Brand Trust Report, says.

The Tata brand has consistently ranked the number one on most India brand valuation reports.

In the latest Brand Finance report released this July, the Tata brand retained its number one slot despite falling 11 per cent in terms of brand value to $13.7 billion.

At that time, Brand Finance had indicated this was on account of its vulnerability in the steel market and its huge exposure in UK post Brexit.

On TRA's Brand Trust Report, however, Chandramouli says the trajectory has been a bit more chequered, with the Tata name coming in at number two in 2010 and 2011, then slipping to fifth position in 2012 when Ratan Tata retired as chairman.

"It regained ground again in 2013 after Cyrus Mistry took over as chairman of the group and steadily slipped to number fourth and fifth in 2014 and 2015 as Mistry struggled with what he describes as legacy issues at the group,” Chandramouli says.

But brand experts such as Harish Bijoor and Alok Nanda believe the blip on the Tata brand is a temporary one.

"A boardroom hiccup has a habit of affecting temporary brand equity. Yes, it is not savoury when it comes to the fore, but I believe the consumer brand equity has not been affected at all by this episode.

The investor brand equity has been ruffled, followed by employer brand equity at the top level, but the biggest impact has been at the political level with people taking sides. I think all of this will abate in the course of time," Bijoor says.

Nanda says that potential employees may be nervous of joining the Tata group given the manner in which Mistry's ouster has unravelled. "But if the group stays the course and is able to keep its attention on performance, I think it should be able to bounce back," he says.

Photograph: Vivek Prakash/Reuters