Tata #5: The Socialist Capitalists

This blog is an assorted sampling of the Tata group’s ethics. That they refuse to pay bribes is well known. A few examples from Shashank Shah’s The Tata Group.

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Here is what Jamsetji Tata had felt when he had visited Manchester:

“What struck him the most were its industrial slums, which were as dark and sulphureous as the medieval version of hell.”

It would be a sentiment that would continue way beyond Jamsetji.

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Tata Finance was, as the name suggests, a lending company. During the Dot Com boom, its MD started investing company money in Internet startups. This was illegal, of course. When the Internet companies collapsed in 2000, Tata Finance was in a deep soup. Technically, the Tatas weren’t liable – it was a fraudulent act by one employee. Yet Tata Sons stepped in and promised to fill in the lost funds since many of the depositors in the company were common folks:

“(Contrast this with) global financial companies that filed for bankruptcy and evaded responsibility for similar dubious investments (in 2008).”

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TCS could have its IPO in the stock markets during the Dot Com boom. Instead, it went for one in May, 2004, when the NDA lost and there was political uncertainty – which meant stock markets were well off their high’s. Why?

“We can certainly list TCS and get a ridiculously valuation… (but) as promotors, we cannot exploit the market because of a short-term situation.”

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When it came to mergers and acquisitions, the Tatas had a “light-touch” and “hands-off” approach. They didn’t fire the management of the acquired firm by default, which was the American practice. Two examples follow.

 

After taking over the Korean Daewoo’s truck division, Ratan Tata wanted to try and bond with the labour force of the acquired business who weren’t thrilled at being taken over by an Indian company. Plus, of course, they worried if their jobs were safe. It was suggested he have lunch in the cafeteria with the workers. He was nervous – he didn’t speak Korean, they didn’t know much English. Yet, during lunch, he managed to give them something they cared about – funding of trips for the Korean employees to Buddhist sites in India!

“The Korean unions… considered the Tatas to be a Buddhist company and India to be a Buddhist country.”

 

The other one is of the Jaguar-Land Rover (JLR) unions, then owned by Ford, who didn’t want to be acquired by a private equity firm (one of the bidders). Why not? Because they had a track record of acquiring, then laying off, then splitting the company into smaller pieces, and selling off the pieces separately for a profit.

 

The Tatas image of being workforce friendly was by then known even in the US. The unions supported the Tatas bid for JLR, making the bid that much easier.

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When Titan started its plant in Hosur, they made a conscious policy of hiring local labour. 400 rural boys of age 16 were selected – given their age, they even assigned foster fathers for each boy! Aside from job related skills, they were helped in adjusting to urban life, and nudged to acquire a degree to improve their job prospects later.

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After the 26/11 attack, two-thirds of the hotel had to be closed. You’d expect a part of the 1,600 workforce to be laid off. But no. The idle time was used to train and raise service levels. Those willing were relocated to other Taj properties.

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In the Assam tea plantations, the Tatas refused to negotiate with terrorists (BODO outfit) who kidnapped some employees and demanded a ransom. Instead, they offered to increase their contribution to the local community, by building hospitals, adult literacy centers, child care centers and schools.

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Gopalakrishnan sums it perfectly:

“We are the world’s best socialists. What Karl Marx said, we are doing all the time. But we look like capitalists.”