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Tatas' new retirement plan: Taste of things to come?

Rabindra Nath Sinha

KOLKATA, Aug. 9

THE intention of Bombay House to reduce the retirement age of non-executive directors (N-EDs) to 70 from 75, as revealed by Mr Ratan Tata at Tata Power's AGM in Mumbai on August 6, would, when carried out, mark a departure from the position obtaining since early April 1992 when the Tata Sons board had, for the first time, adopted a resolution on the subject.

The retirement age for whole-time directors was then set at 65.

If the adoption of a retirement age policy for directors was then considered by corporate watchers as Mr Tata's smartest move just in a year after he became the Tata Sons supremo (Bombay House had made the announcement on March 25, 1991), the present move may be seen as part of his efforts not only to fine-tune the policy, but also move a step further towards having Bombay House's own corporate governance code.

The implementation of the April 1992 policy had seen, in phases, the retirement, on completion of 75 years, of high-profile personalities like Mr Russi Mody (from chairmanship of Tata Steel) and late Darbari Seth (from chairmanship of Tata Chemicals). Needless to say that the present move, when acted upon, would see several N-EDs stepping down.

Implementation of the 70-year-stipulation would mean in-house whole-time directors getting just about two terms — one term usually is for three years — to serve as N-EDs. This would be against three terms plus under the existing 75 year-stipulation. Others, who retire, say at the age of 60, can have straightaway up to five terms in the normal course. Under the proposed stipulation, they would qualify for three terms plus.

In effect, more new faces would be inducted on the boards of major group companies at intervals shorter than hitherto.

According to knowledgeable quarters, the Bombay House top brass have considered from time-to-time several proposals to put in place the group's own corporate governance code. It is understood that one such proposal, on which no decision has yet emerged, was to discontinue the practice of nominating managing directors as N-EDs on the boards of the same companies from which they retired after a long tenure.

As for fine-tuning, it may be mentioned that this is not the first attempt since the retirement age policy was formalised over 10 years ago. This is because about three years ago, the group had decided that the 65-year stipulation for whole-time directors would not apply to Tata Tea. The retirement age for whole-time directors of Tata Tea was fixed at 60 reportedly on the ground that people join plantation companies relatively at an early age.

That explained how Tata Tea's immediate past Managing Director, Mr S.M. Kidwai, and director (finance), Mr S. Kabiraj, had to retire (both with effect from October 1, 2000) on their completing the age of 60.

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