Ratan Tata Retirement

When long-serving employees retire, companies present them with mementos or gold watches as a form of gratitude and in recognition of services rendered.

But what should a company do when its boss, or sort-of owner, is about to hang up his boots?

Tata Consultancy Services (TCS), India’s largest infotech company, is facing just such a question. It has probably answered it the wrong way.

It’s superboss, Ratan Tata, is about to walk off into the sunset in the next six months, and TCS has decided that Rs 5 crore is a fitting reward for his “long-standing contribution to the sustained growth and success” of the company, according to a report in Business Standard.

Is the company honouring or diminishing Ratan Tata, India’s tallest businessman by far, by putting a price of Rs 5 crore on his life-long efforts to put TCS on the global map? Getty Images

Is the company honouring or diminishing Ratan Tata, India’s tallest businessman by far, by putting a price of Rs 5 crore on his life-long efforts to put TCS on the global map? This, when the formal compensation Tata will receive in 2011-12 will exceed Rs 8 crore.

There’s no question Ratan Tata, who retires this December when he turns 75 as per group policy, has rendered invaluable services to every part of the Tata group and to business, in general, both in India and abroad. If Indian business has a reputation abroad, it owes much to Ratan Tata and his group.

TCS, as the crown jewel in the Tata group, has taken in the lead in recognising Tata’s contribution to its own growth and that of the group.

But there are several reasons to think it is not doing the right thing by trying to put a monetary value to Tata’s contribution – even though this may not be the intention behind the TCS gift.

First, listed companies should not be singling out individual directors for special compensation when there are already board and AGM resolutions that specify what Tata should be paid for his work.

Second, when an exception is supposed to be made to this rule, it is the minority shareholders who should vote on it – not all shareholders. As owner of the vast majority of TCS shares (nearly 74 percent), any such resolution is going to pass, especially since Tata Sons, the main holder of TCS shares, is also run by Ratan Tata. The TCS management is thus putting Tata in the embarrassing position of being the promoter who votes on his own retirement bonus.

Third, since it is fairly certain that almost all Tata companies will also be bidding farewell to their larger-than-life promoter, they could all fall into the TCS trap of saying it not with roses, but cash. The TCS example, if followed by other Tata group companies, will be no different from the political spectacles we see where leaders are weighed in gold or garlanded with cash for services rendered.

We think a Mayawati being received with a garland of Rs 1,000 notes is gross, but a Tata being gifted a Rs 5 crore cheque is somehow sane and sensible. The difference is only in the optics: one looks gross, and the other doesn’t because it happens out of public view.

The point is simple: if Ratan Tata’s services have been priceless and invaluable (which they demonstrably are), why try and show gratitude by trying to do precisely the opposite – by indicating a price and putting a monetary value on what is inestimable?

The Tata Group should not bring down Ratan Tata to the level of our crass political class. They should say it with roses.

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