In the cockpit gently, the Ratan Tata mantra

WITH Ratan Tata’s passing, the Tata Group, Indian business and the country have lost a great leader and role model. Ratan was a trained airplane pilot, like JRD Tata before him. I have flown with Ratan in single-engine planes in rough weather when he was completing the flying hours required for his licence. What he accomplished as chairman of the Tata Group in the 1990s was the conversion of an airplane in flight with all stakeholders aboard. The group has been modernized and enlarged.

Ratan converted the reliable airplane he inherited from his predecessors into a modern jet capable of flying farther and competing internationally. The Tatas are not what they used to be, nostalgic old-timers say, though the group remains what it has been for over a century: the most widely trusted pillar of Indian industry.

The Tatas are trusted not because they have increased shareholders’ wealth, or because they have the largest philanthropic trusts. They are trusted because their human values have endured, and their values of business responsibility have been preserved. Ratan Tata lived by these values personally. He lives on as a role model.

Ratan led the group through a difficult transition after taking over the baton of leadership in 1991 from JRD Tata who had led the group for 50 years. JRD had built the group after India’s independence when the foundations of the country’s industry were being built, which the British had prevented.

JRD had to take many difficult decisions in those difficult times. He said whenever he was in doubt, he would ask himself what would be good for India, and then what would be good for the Tatas. He would choose what was good for India because it would turn out to be good for the Tatas also in the long run. 

As an enterprise, the Tatas were the most trusted business enterprise in the country, trusted even more than the government. The national industrial policy, which the private business sector had supported, reserved basic industries such as steel and fertilizers for the government sector because they required large amounts of capital which the private sector could not raise. Tata Steel’s employee unions prevented the government from nationalizing Tata Steel. They said the Tatas cared very well for their  employees’ well-being, and they were proud to work for the Tatas.

The Tatas had been the first to introduce provident fund and other welfare measures for their employees even before such policies were implemented in the Western world. Tata Steel’s shares were treasured by older persons as a reliable insurance for their old age. With union support, Tata Steel remained in the private sector as a role model of socially responsible business enterprise. 

Ratan took over leadership of the Tata Group when the Indian economy was opened to foreign markets in 1991. The general view was that Indian industry had been shielded too much from foreign competition until 1991 and was not fit for international competition. Ratan took advantage of the new freedoms given to business and made the Tatas the most admired Indian business group internationally.

The Tatas took over ailing, marquee British companies — Corus (British Steel), Jaguar Land Rover, and Tetley Tea — and reversed the colonization of Indian industry. By 2010, Tatas had become a global organization with over 60 percent of revenues from outside India, investors and employees around the world, and many foreign nationals in the upper management. Along with foreign investors came foreign technologies and Western ideas of ‘professional’ business management for ‘modernizing’ Indian industries. 

Tata Steel’s tagline was ‘We also make steel’, an expression of the Tatas’ social responsibility. The ideology spread around the world from the US in the 1990s was that businesses contribute to society by increasing the wealth of their investors, and ‘the business of business must be only business’. B. Muthuraman, CEO of Tata Steel, was asked by a young financial analyst in New York, in a quarterly earnings call (a new practice for Indian companies), when Tata Steel would become a proper capitalist enterprise and shake off its ‘socialist’ moorings.  

Prime Minister Manmohan Singh addressed the Confederation of Indian Industry (CII)’s members in 2007. They thanked him for opening up the economy in 1991 and for enabling them to create more wealth. He gave them some advice. He asked them to resist excessive remuneration to promoters and senior executives and discourage excessive compensation.

“Rising income and wealth inequalities, if not matched by a corresponding rise of incomes across the nation, can lead to social unrest,” he warned. “An area of great concern is the level of ostentatious expenditure on weddings and other family events. Such vulgarity insults the poverty of the less privileged.”

He called on industry to be proactive in offering employment to the less privileged and encouraged CII to implement its programme of affirmative action for the social castes who had been historically deprived of equal opportunities. Sadly, only the Tatas and a few others implemented the programme.

The Tatas and some other industries led a  movement to develop a national, voluntary code of business responsibility. They asked the government to support it. Another business lobby proposed an alternative: compulsory spending of two percent of net profits by companies on CSR (corporate social responsibility). It would be much easier for industry to implement and for government to monitor.

Most NGOs also supported this proposal. It would provide them a guaranteed source of funds. The Tatas pointed out that they were already spending more on CSR.

Companies must be accountable for the impacts of their operations, from which they generate their revenues and profits, on the well-being of society and the environment. The ‘two percent CSR’ was like offerings at temples by the rich for absolution of sins committed. It was a very small price to pay for the ease of doing business. 

The stock market capitalization of the Tata Group of companies increased greatly during Ratan Tata’s tenure as chairman: from $5 billion in 1991 to $100 billion in 2021 when he retired. The Reliance Group performed even better in stock markets, increasing its value from $2 billion to $220 billion in the same period. Since then, fortunes have changed. As I write today, Reliance is worth $277 billion and the Tatas $400 billion!

Stock market valuations are speculative and fickle. They do not measure real value. The Tata Group has endured as the most respected business enterprise in India because it is built on human values, not driven by stock valuations. 

Ratan’s repurposing of the Tata Trusts doesn’t generally  find mention. In much the same way as he worked with different Tata companies to give them a group identity, so also with the trusts. He brought them together as the Tata Trusts. He professionalized their functioning without diminishing their social objectives. The trusts found that they could be more collaborative and outcome-driven in addressing developmental objectives in areas such as cancer and nutrition.

Ratan will always be remembered for his many organizational achievements and leadership qualities.  But above all it will be for the grace, kindness and humility with which he lived. n 

 

Arun Maira is the author of ‘Shaping the Future: How to Be, Think, and Act in the New World’