Sushhma Ramachandaran

The reputation of the Tata Group for maintaining high standards of corporate governance and being one of the most philanthropic industrial houses in the country has been highlighted in recent days. The demise of the group’s scion, Ratan Tata has prompted an outpouring of commentary over the values on which the business house has been based. The reality is slightly different, however, as its performance in these areas has been overtaken by newer and more contemporary entities in the corporate world.

Yet it cannot be denied that Tata group companies have never given leeway for bribery or corruption. The techniques used by other large corporates to tweak the policies and regulations in their favour have not been introduced by the Tatas. A recent survey disclosed that Jamsetji Tata, the Founder of the Group, is the most generous donor of all time, exceeding Bill and Melinda Gates. The evidence of this is visible in Mumbai where many medical and research institutions set up by the Tatas continue to be institutions of excellence over the years.

It's, therefore, surprising to learn that the Tatas don't have the best record on corporate governance. In one such controversial decision, the Tatas face scrutiny and criticism for its effort to deal with the remediation of toxic waste at the site of the Bhopal Gas Tragedy. The issue created tremendous controversy in 2007 as Ratan Tata had reportedly urged the government to withdraw the demand for Dow Chemicals to deposit 21 million dollars (Rs. 100 crores) as a deposit for cleaning up the site. While the Tatas denied the charge, they conceded a proposal had been made to set up a fund to enable such environmental remediation.

Environmental activists alleged that the whole exercise was aimed at clearing the way for Dow to invest in this country. The chemicals giant had taken over the infamous US-based Union Carbide responsible for the horrific tragedy in 1984. The Tata group’s proposal was viewed as a way to absolve the multinational from the principle of “polluter pays”,  or ensuring the polluter takes responsibility for its environmental damage.

Around the same time, there was an incident of police firing on Odisha tribals who were protesting against the setting up of a steel plant in the state by the Tatas. Though the company was not directly responsible for the police action, it was carried out in support of the steel project. The group’s reputation for integrity also took a hit when Ratan Tata hired a PR firm headed by Niira Radia who relied on networking to manipulate government policies.

The tapes of her phone conversations with people in powerful positions in the government and media displayed tactics aimed at influencing policies in favour of the Tatas.  And finally, the bruising battle with Cyrus Mistry who was initially appointed to head the Tatas and then fell out of favour, gave rise to questions about fair play in the corporate boardroom.

Wipro chairman Azim Premji and HCL chairman Shiv Nadar

In light of these incidents, it becomes difficult to portray the group as having an unblemished record in corporate governance. The conventional view of the conglomerate as the flagbearer of business ethics in this country has now shifted to the new information technology giants. The Ethisphere Institute, a U.S.-based firm that specializes in defining and measuring corporate ethical standards has put HCL Tech and Infosys into its list of most ethical global firms for 2024.

It has also brought Indusind Bank into the list while Tata Steel made it last year. But Infosys has been on the list for the fourth year in a row indicating the high corporate governance standards being maintained in the IT sector.

The technology sector has outpaced other industrial sectors on the philanthropy front as well. As per the Hurun Philanthropy List, the most generous corporate leader in 2024  is the founder of HCLTech, Shiv Nadar, and family followed by Wipro chairman, Azim Premji, and family. Their donations of Rs. 2042 crore and Rs. 1774 crore are way ahead of the Rs. 376 crore donated by Mukesh Ambani and his family who are in third place.

The baton has thus been passed in a sense from the older business houses to the new technology titans both in terms of business ethics as well as philanthropy. This is as it should be, given the fact that some of these ventures - like HCLTech and Infosys - are not weighed down by inheritance issues and operate in a more contemporary fashion.

They have yet to be tarnished by allegations of corporate cronyism or seeking undue influence in policymaking. Even more important, they have achieved success not just within the country but globally as well. Their rapid growth has been carried out without much publicity and they have become leading services exporters. Thereby earning considerable foreign exchange for the country.

The fact that sunrise industries are adopting high standards of business ethics is a welcome development. As these are now becoming the powerhouses of the economy, it must be hoped that their example on this score could be emulated by other industries. At the same time, one should not rule the Tatas out of this list.

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First, the group has maintained superior levels of corporate governance right from its inception and a few errors cannot wipe out a century-old reputation. Second, the group is also a technology leader with the country’s biggest IT firm, TCS in its stable. Even so, it is essential for the storied business house to ensure that its commitment to ethical business norms is deepened and sustained in the future. Equally, the newer tech sectors must maintain their existing standards of corporate governance and large-hearted philanthropy to retain their status as models for doing business on ethical lines.