Guest Article: Prabhakar Mundkur: Are Brands dependent on their Owners?

Cyrus Mistry's removal from Tata Sons would have a minimal effect on the consumer of brands in the Tata Group. But the question is, whether a leader's status have an impact on the brand at all.

The other day, someone argued that the effects of Cyrus Mistry being sacked by Tata Sons would have a minimal effect on the consumer of brands in the Tata Group. He doubted whether a person who was going to buy a Tata Car or go into a Tanishq store would be affected. I agree with him that the consumer wouldn't give a damn, or at least not for the moment. But unfortunately the reverse is also true. I doubt the consumer cared very much when Ratan Tata decided to give up his position as Chairman of Tata Sons four years ago. Frankly, the consumer wouldn't have missed a heartbeat. Another argument was that when the chairman of a company is an icon, it is more likely to affect the brand. That set me thinking on whether a leader's status had an impact on the brand at all.

In the case of Tata's, their group company equities fell 1-5% on the day after Cyrus Mistry's ouster and even 8% for one particular Tata company three days later. Of course one could argue that stock market confidence might be insulated from consumer confidence or at least there might a lag between the two.

But to take the stock argument further lets look at what happened to Apple post Oct 5, 2011 when Steve Jobs died. On that day, shares of Apple closed at a split adjusted price of $50.53 per share. On August 12,2016 Apple closed at $115.96 per share. Since Steve's death, shares of Apple are thus up 129.5% or lets says 130% in 3 years and 10 months rounded up.

Although Apple may have lost 2-3% market share points to Android over the last year, there is nothing to show that Steve Jobs' death might have had any effect on iPhone sales over a 10 year period if one looked at it purely from a business cycle point of view.

The same could be said of Mac sales which is their second largest revenue earner.

Founder Mythology

In spite of a Bollywood blockbuster, Mark Zuckerberg is not alone in our obsession with founder mythology. What comes to mind when we think about Apple? Steve Jobs, the creative visionary in black turtlenecks. Virgin? Richard Branson, the charismatic leader at the helm of many ventures. Tesla? The trailblazing entrepreneur Elon Musk who gave life to Iron Man. The Trump Organization? Bill Gates the software whiz kid turned philanthropist. The real estate mogul turned politician, Donald Trump. We think about Mr. Trump's own brand image before we think about that of his enterprises or if we were to imagine him as President of the United States.

So there is hardly a doubt that the founder affects the impressions of their organisations. But brands particularly seem a little insulated perhaps from first the founder and the organisation brand. Or at least there is a lag between the things that affect the company and things that affect the brand. And most of all founders want their brands to outlive them and this is an important motivation.

In the Nestle controversy last year the government confirmed that they had found MSG in Maggi Noodles on April 2015 ( It came to light much later that Nestle had nothing wrong and were acquitted in the case by the courts ). In spite of the terrible time the company had to go through in the following months including a change of CEO, the brand remained strong and resilient. Consumers wanted to get it back on the shelves once again. And once it was back on the shelves after a long running controversy, consumers embraced the brand like a long lost friend. Proving that a strong brand can weather itself through a major controversy without losing its consumers.

Founders versus Professional CEOs

Most founders think that professional managers hired to run a company will not have the same motivation that a founder does. If one looks at the world's largest companies, then Steve Ballmer, John Chambers, Tim Cook, are all employees who have or soon will become billionaires since they were hired to run their respective companies. The founders in these companies are already billionaires many times over, thus their motivation will always be everything else but money.

Founders will feel a personal sense of responsibility to shareholders far more strongly than a hired professional manager will. At least most founders think that professional managers won't have the same level of empathy/responsibility to the group that a founder has or had.

According to founders they carry a lot more weight and far more respect than a professional manager does. In rough times a founder will also be a lot more to bet his or her own money once again to turn things around. But it is difficult to conclude that a professional manager won't do as much as a founder if one looks at CEOs like Tim Cook.

To that extent Cyrus Mistry of the Tata Sons was both Chairman and owned 18.3 % of the Tata stock. So in many ways he was the ideal CEO. Because every decision of his would affect his own family wealth as much as it would affect the Tata brand.

Brands are Intangible

Whether brands are run by founders or professional managers brand values are built and created in the long term over large time periods. And I personally think that brands are impervious to changes in the management as long as they are managed and nurtured well. Brands are intangible, however much brand equity experts may choose to valuate them. Brands are made in consumers minds. Unlike products that are made in factories. Or unlike companies that are made on the stock market or start ups that are made on unrealistic valuations. A product can be objectively defined, measured and assessed. A brand is intangible, ephemeral and abstract.

As Scott Cook said, "A brand is no longer what we tell the consumer it is - it is what consumers tell each other it is."

So long live the brand!