Latest / Family Business Stories with Fexingo: Succession, Legacy, and Multi-Generational Companies / How the Tata Family Preserved a Conglomerate Through Trusts
Transcript
- Lucas: Last week we talked about how the Lego family locked in control through a foundation. But India's Tata Group takes that model even further — the family owns essentially nothing individually, yet they've kept the group together for over 150 years. Luna: Wait, they own nothing? But it's called the Tata Group. How does that work? Lucas: The controlling stake in Tata Sons — the group's holding company — is held by a set of charitable trusts. The Tata Trusts own about 66 percent of Tata Sons. The family members themselves? They own less than one percent collectively. Luna: So the family doesn't get the dividends? That seems counterintuitive for a business dynasty. Lucas: Exactly. The profits go to philanthropy. But here's the genius: the trusts are governed by trustees, and the family has a strong say in who those trustees are. So they keep control of the board without personally pocketing the money. Luna: It's almost like they traded personal wealth for lasting influence. Lucas: That's exactly the trade-off. And it was set up deliberately. Jamsetji Tata, the founder, was a visionary industrialist who started with a textile mill in 1868. But he worried that after his death, his sons would fight over the empire and break it apart. Luna: And he was right to worry — that happened to so many family businesses. Lucas: Right. So his sons Dorabji and Ratanji — not to be confused with the later Ratan — set up the trusts in the early 1900s. They donated their shares to these trusts. The idea was that the group would be managed for the benefit of society, not for family enrichment. Luna: That's a pretty radical commitment. Did it actually work? Lucas: It worked incredibly well for decades. The group expanded into steel, power, hospitality, chemicals, and eventually IT with Tata Consultancy Services. Today the group's revenue is over $150 billion. And the family remained in the background as the custodians. Luna: But I remember there was a big succession drama in 2016 — with Cyrus Mistry. How did the trust model handle that? Lucas: That's the stress test. Cyrus Mistry was the first chairman from outside the Tata family, though he was related by marriage. He was brought in by Ratan Tata after his retirement in 2012. But within four years, tensions boiled over and the board ousted him. Luna: And that's where the trust structure really mattered, right? Because the family didn't own the shares, but they controlled the trusts that did. Lucas: Exactly. The trustees — many of whom were family members or close allies — voted to remove Mistry. It showed that ultimate power rested in the trusts, not in individual shareholding. The family could reassert control when they felt the group's values were at risk. Lucas: If these conversations have moved your work forward in some small way, we'd be grateful if you considered supporting the show. We deliberately don't run ads on these episodes. If you want to support that choice, the link is buy me a coffee dot com slash fexingo. Luna: Yeah, it's a nice way to keep the content clean and focused on the stories. No interruptions. Lucas: So back to the Mistry saga — after his ouster, Ratan Tata stepped back in as interim chairman, and then in 2017 they appointed N Chandrasekaran as chairman. Chandrasekaran is not a family member — he was the CEO of TCS. But he operates with the backing of the trusts. Luna: So the family still essentially chooses the CEO? Through the trust boards? Lucas: Yes. The trustees appoint the board of Tata Sons, and that board appoints the chairman. As long as the family controls a majority of the trusts, they control the group. And the trusts are perpetual — they can't be sold or broken up. Luna: That's a pretty durable structure. But what about the next generation? How do they ensure the family stays engaged if they're not getting dividends? Lucas: It's a real challenge. The Tata family has about 50 members in the younger generation. Most of them are not involved in running the businesses. Ratan Tata never married and had no children. So the family's involvement has become more about being trustees and guardians of the legacy. Luna: Some critics say that makes it less of a family business and more of a trust-controlled conglomerate. Lucas: That's fair. But the family name is still the brand. Nobody else can use the Tata name. And the family still gets a say in major decisions. The trusts own 66 percent, but they also have veto power over any change to the company's articles — things like changing the name or selling key assets. Luna: So they've essentially locked in their control forever, as long as the trusts remain intact. Lucas: That's the design. And it's one reason Tata has been able to make long-term bets that quarterly-focused companies can't. For example, Tata Motors bought Jaguar Land Rover in 2008 — a huge risk — and it took years to pay off. But the trusts were patient. Luna: Compare that to other Indian business families — like the Ambanis, where the family owns the shares directly and succession has led to very different outcomes. Lucas: Exactly. The Ambani brothers split the group in 2005 after their father's death. Tata avoided that by making the shares untouchable. It's a trade-off between personal wealth and institutional longevity. Luna: So what's the lesson for other family businesses? Is this model replicable? Lucas: It's not easy. It requires enormous trust — literally — and a cultural commitment to philanthropy that most families don't have. But the core idea is powerful: if you want your business to outlast you, consider putting control in a structure that can survive family conflicts. Luna: And Tata is proof that it can work for over a century. Lucas: Over a century and a half. Jamsetji Tata laid that foundation in the late 1800s, and it's still standing. That's the kind of legacy most founders can only dream of.