Question 5

Case study: the Tata Group: values, ethics, the ethics counsellor and the Sustainability Group

18 marks

Time to write
About 36 minutes
Topic
Case studies on Indian corporates
Notes
Crux notes

Question

Question 5 · 18 marks

Read the case below carefully and answer the questions that follow:

India's largest conglomerate, the Tata Group, was founded in 1868 by Jamshedji Tata and has its headquarters in Mumbai, India. Under the management of Ratan Tata, great-grandson of the founder, the group successfully transformed itself from a national corporation into a leading multinational corporation. Its 30 listed companies have a combined market capitalization of USD$ 145.3 million. Today the group consists of over 100 companies, and its turnover exceeds $70bn.

Every Tata Corporation runs independently, with a board of directors and shareholders of its own. It operates businesses in 10 different industries (among them information technology, steel and automotive, consumer and retail, infrastructure, financial services and aerospace, tourism and travel, and telecom and media) spreads over 100 countries, and it employs over 700,000 people across the world. The Tata group is highly decentralized, and its member companies enjoy great aut-onomy in matters of strategy and operations. The Tata corporate brand is the main instrument that unifies the group, and it embodies values that every company in the group shares.

Integrity, Understanding, Excellence, Unity, and Responsibility are the core values of the group. It is reputed for having consistently upheld the highest ethical standards. Its care is not only for the benefit of its shareholders; it also considers the interest of the employees, communities, countries, and environments where it work.

For over 140 years the Tata group has been respected in India for its commitment to strong values and ethics in the conduct of business. With the noble objective of giving wealth back to the society, they serve Two-thirds of Tata Sons' equity, Tata Sons being the promoter holding company of Tata, is held by philanthropic trusts, which have created national institutions for science and technology, for medical research, for social studies and for the performing arts. Tata Group is a corporation that is ethical and philanthropic. By way of these trusts, Tata Sons Ltd. uses, on average, between 8 to 14% of its net profit each year for various social causes. With roots in India and wedded to traditional values and strong ethics, the Tata companies are building multinational businesses that will grow through excellence and innovation, always putting first the interests of shareholders, employees and civil society.

Tata Iron and Steel Company Ltd. (TISCO), better known as Tata Steel and nearly a century old, is among the oldest companies in India. Founded in 1907 by Mr. Jamshedji Tata, a visionary, it is the first integrated private sector steel company in Asia and the largest in India. From its inception the company has focused on the customer, operational excellence, the welfare of employees, organizational leadership, and social responsibilities and citizenship. In keeping with its thrust on these dimensions, it ranks among the companies most respected in the country, for its value-based practices, its ethical and dynamic practices, and its competitive performance. The name 'Tata' has always been a synonym for trust. The Tata group's statement of purpose (Tata Steel is part of this group) expressly seeks to improve the quality of life in the communities that it serves. It states, "Our heritage of giving back to society what we earn inspires trust among consumers, employees, shareholders, and the community. Through the formalizing of the high standards of behaviour expected from employees and companies, this heritage will be continuously enriched.

While every Tata company carries out its own CSR programme, Tata Sons has recently set up the Tata Sustainability Group (TSG). The TSG will guide and support all Tata companies, and provide them thought leadership, in embedding sustainability into their business strategies. TSG has also focused on programmes of volunteering for Tata companies. At present the pool of Tata volunteers is made up of 25,000 employees from 150 companies, in 60 countries and 540 locations. 66 percent of Tata Sons' equity (Tata Sons being the promoter holding company) is held by Tata trusts, and wealth is thereby returned to the society, in keeping with the belief of Jamshedji Tata: In a free enterprise, the community is not merely another stakeholder in business but is, in fact, the very purpose for which it exists. The core purpose of the Tata group is improving the quality of life of the communities it serves globally, by creating long-term stakeholder value.

Among other things, implementing the Tata code of conduct was mandatory for the group companies, which are relatively autonomous, if they were to leverage on 'Tata' as a brand. For Tata Steel, successfully implementing this code of conduct was not a matter of choice. For implementing the code of conduct, the company created a new position, 'ethics counselor', at the senior management level. He is identified internally and made to report for day-to-day functioning to the Managing Director of the company. He, however, reported directly to the headquarters of the group.

In each department, the head of the department identified one person to look after, in addition, the implementation of the code of conduct in that department. On matters related to ethics, these ethics coordinators reported directly to the ethics counsellor. For other purposes, however, they continued to report to the heads of their respective departments. In consultation with the ethics counsellor, the ethics coordinators organized a large number of awareness programmes each year. Such programmes were extended to other stakeholders of the company, like its suppliers and dealers. After succeeding in making the employees aware, the ethics counsellor organized nearly 15 awareness programmes for families of the executives. Family members are made to feel proud that one of them belongs to an organization that is 'value-based'.

Questions: Attempt any three

  1. Discuss the core values that the Tata Group of Companies upholds.

  2. How do you evaluate the Tata Group? How far did the success of this conglomerate owe to ethical practices?

  3. What initiatives has Tata Group undertaken for promoting ethical practices? Please elaborate on the topic.

  4. Examine what role the Counsellor plays in enforcing Code of Conduct practices.

  5. For what purpose was Tata Sustainability Group established? In what way does TSG contribute to the organization?

Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.

Before you write

Read off the question and its marks

36 minfor 18 marks

Read from the question

  • any threeAnswer any 3 of the 5, 6 marks each. Only 3 are marked: a fourth earns nothing.
  • evaluateBoth sides: the strengths, the limits, then your own view.

What the paper leaves open

The market value of the listed companies is printed as "USD$ 145.3 million"; it is kept as printed, and no part depends on it.

Write it in this order

The parts stand alone: start with the one you are surest of.

  1. Read the data; note exactly what is asked 2 min
  2. 1 First part attempted, drawn from the case 6 marks 11 min
  3. 2 Second part attempted, drawn from the case 6 marks 11 min
  4. 3 Third part attempted, drawn from the case 6 marks 10 min
  5. Check: arithmetic, units (₹, %), final answer underlined 2 min

Short on time? A few lines on every part beat a full answer to one: each part is capped at its own marks.

Try it first. About 36 minutes for 18 marks. Write it out, then open the solution.

Solution

Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.

Any three of the five parts are to be attempted, at 6 marks each. All five are answered so that the reader may choose.

(i) Core values upheld by the Tata Group

The case names five core values:

  1. Integrity: honesty and fairness in all dealings, and transparency in conduct.
  2. Understanding: care and respect for colleagues, customers and communities, and sensitivity to their needs.
  3. Excellence: the highest standards of quality in products, services and work.
  4. Unity: teamwork and cooperation among people and across group companies.
  5. Responsibility: accountability to stakeholders, society and the environment.

The case also shows the values in practice: a reputation for the highest ethical standards; concern for employees, communities, countries and the environment, not only shareholders; returning wealth to society through the trusts that own most of Tata Sons; and a stated purpose of improving the quality of life of the communities served. The shared Tata brand carries these values across otherwise independent companies. Because the group is highly decentralised, these shared values do the work that central control would otherwise do: they guide each company's decisions in the same direction.

(ii) Evaluating the Tata Group and the contribution of ethical practices

Evaluation. The group is a highly successful and respected conglomerate: over 100 companies in ten industries across more than 100 countries, more than 700,000 employees and a turnover above $70 billion, transformed from a national to a multinational group. Its structure is decentralised, with autonomous companies held together by a common brand and values.

Contribution of ethics: to a large degree.

  • Trust and brand value: the case notes that the Tata name has always been a synonym for trust; this trust attracts customers, partners, employees and investors and lets a decentralised group act as one.
  • Long-term orientation: putting shareholders, employees and society together, rather than short-term gain, has supported steady growth over more than a century.
  • Reputation and goodwill: philanthropy through the trusts and value-based practices have made the group respected in India for over 140 years, as the case says.
  • Employee commitment: value-based culture and pride in belonging to the group motivate employees. Ethics alone did not create success, strategy, excellence and innovation mattered too, but it was a core source of the group's competitive advantage. The case's own example, Tata Steel, respected for value-based practices and competitive performance alike, shows that ethics and business success went together rather than against each other.

(iii) Initiatives to promote ethical practices

  1. A group-wide code of conduct, made mandatory for group companies wishing to use the Tata brand.
  2. At Tata Steel, a new senior post of ethics counsellor to implement the code, reporting to the managing director for day-to-day work and directly to group headquarters.
  3. Ethics coordinators in every department, reporting to the counsellor on ethical matters.
  4. Awareness programmes, a large number each year, organised by the coordinators in consultation with the counsellor.
  5. Extension of programmes to suppliers and dealers, so that ethics covers the value chain.
  6. Nearly 15 awareness programmes for executives' families, building pride in a value-based organisation.
  7. Philanthropic trusts owning most of Tata Sons, and the use of 8 to 14 per cent of net profit for social causes.
  8. Creation of the Tata Sustainability Group to embed sustainability in business strategy.

Together these make ethics a system rather than a slogan: a written standard (the code), people responsible for it (counsellor and coordinators), regular communication (awareness programmes) and extension beyond the company's walls (suppliers, dealers and families). No single measure would have been enough on its own. What made the difference was that the code had named owners, was talked about constantly and reached people outside the company, all with the visible backing of the group's leadership, which is where ethical conduct in any business has to start.

(iv) Role of the ethics counsellor in enforcing the code of conduct

  1. Led implementation of the code, from a new position created at the senior-management level.
  2. Dual reporting: the counsellor reported to the managing director for day-to-day functioning but directly to the group's headquarters. This line to headquarters gave the post independence from local pressure.
  3. Headed the network of ethics coordinators, one in each department, who reported to the counsellor on matters related to ethics and to their own heads for everything else.
  4. Guided the awareness programmes: the coordinators organised a large number each year in consultation with the counsellor, and they were extended to suppliers and dealers.
  5. Reached the families: once employees had been made aware, the counsellor organised nearly 15 programmes for executives' families.
  6. Was the point of reference on ethics in the company, since every coordinator reported ethical matters to the counsellor.

The case does not set out how complaints are investigated; in practice an ethics counsellor in such a post would also advise employees and examine reported breaches, but that is a general point, not a fact given in the case. The role turns the code from a document into daily practice, combining independence with reach into every department. Its success at Tata Steel, awareness among employees, then programmes for suppliers, dealers and families, shows how a single senior post, backed by headquarters, can change the culture of a large company.

(v) Purpose and contribution of the Tata Sustainability Group

Purpose. Although each company runs its own CSR programme, Tata Sons set up the TSG to give the whole group a common direction in sustainability: to guide, support and provide thought leadership in embedding sustainability in business strategy, not treating it as an add-on.

Contribution.

  1. Guidance and support for all Tata companies on sustainability.
  2. Thought leadership on how to embed sustainability.
  3. Integration of sustainability into business strategies.
  4. Volunteering: a pool of 25,000 employee volunteers from 150 companies in 60 countries and 540 locations.
  5. A common direction for companies that each still run their own CSR programme, strengthening the group's reputation and its purpose of improving quality of life through long-term stakeholder value.

Where the 18 marks sit

#ComponentMarks
1First part attempted, drawn from the case6
2Second part attempted, drawn from the case6
3Third part attempted, drawn from the case6
Total18
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