ETHICAL LEADERSHIP: RATAN TATA AND

INDIA’S TATA GROUP

Anshul GuptaApourv Tiwari

Chandrima RoyParul SharmaPrachi Bajpai

Sandip ChoudhurySarthak Mishra

INTRODUCTION

• This case is about the Tata Group, one of the leading business houses in India, a key emerging market. • The group had a long-standing reputation for ethical

leadership and was well known for its corporate social responsibility and principles such as

the "Tatas don't bribe" and the "Tatas don't indulge in politics".

• Under the leadership of Ratan Tata, the group carried forward this legacy and consolidated its businesses further in India while also acquiring a global footprint.

CONTD….

• India, like many markets in transition, was passing through a period when excessive power was concentrated in the hands of the political elite and their cronies.

• This had led to a government-dominated economy characterized by nepotism, patronage, and corruption.

• Despite operating in this market, the Tata Group had managed to build its empire emphasizing the twin pillars of

"trust" and "integrity" - so much so that these had become a key aspect of

the Tata brand.

• However, in 2010, the group and its leader Ratan Tata were dragged into the infamous 2G scam that broke out in India.

CONTD….

• The case study deals with one of the major challenges that organizations face in many emerging markets - CORRUPTION. • It is designed to spark a discussion on whether

corruption should be encouraged; • whether this is a necessary but transient phase in the

development of modern capitalism in emerging markets; • what organizations should do to fight the menace of

corruption; and • whether ethical leadership is the answer while operating

in emerging markets.

ABOUT THE TATA GROUP

• Founded by JAMSHEDJI TATA in 1868• As of early 2012 the major TATA companies were

TATA STEELTATA MOTORSTATA CONSULTANCY SERVICESTATA POWERTATA CHEMICALSTATA GLOBAL BREVERAGESTATA TELESERVICESTITANTATA COMMUNICATIONSINDIAN HOTELS

….CONTD.

• Operations in 80 countries across the globe and exported products and services to 85 countries• Revenue of USD 83.3 billion in 2010• Employed over 425,000 people worldwide• As of early 2012, the TATA Group was a globally

renowned name with its brand ranked 41st among the world’s 100 most valuable band

FINANCIAL SNAPSHOT OF TATA GROUP

TATA GROUP’S REVENUE BY SEGMENT

Tata Group

• Each enterprise in the Tata Group operate independently with its own board of directors and share holders.• Tata Group had a series of illustrious leaders: Jamshedji

Tata, Dorab Tata, Ratan Tata.• It is Ratan Tata who took over in 1991 made the

company global.• Ratan Tata turn down an offer from IBM to join Tata

Group (TISCO).• In 1981, he became the chairman of Tata engineering

and locomotive company (TELCO) and Tata industries.

• To bring in greater integration Ratan Tata created the group executive office, whose members were represented on the board of Tata company.• To protect individual companies from hostile

takeover he also increased the stake of Tata sons.• In subsequent years, the group sold its stakes in

Merind (including Tata pharma), Goodlass Nerolac, Lakme and ACC.

Mergers & Acquisitions

• Tata controlling stake in VSNL• Purchased Switzerland based Tyco International’s

undersea telecom cables.• Acquired Daewoo commercial vehicles.• Acquired Incat International (American auto and

aerospace company).• Acquired hotels like The Pierre, Ritz Carlton,

Camden Place.• The iconic acquisition of Jaguar and Land Rover.

Ratan Tata’s Response

• Leadership is the ability or authority to guide and direct others toward achievement of a goal.

• Denied the allegations of 2G Scam• 2010, Approached Supreme Court • In April 2011, CBI gave a clean chit to Tata Group.

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Habits of Strong Ethical Leaders• Ethical leaders have a strong personal character.• Ethical leaders have a passion to do right.• Ethical leaders are proactive.• Ethical leaders consider stakeholders’ interests.• Ethical leaders are role models for the organization’s

values.• Ethical leaders are transparent and actively involved

in organizational decision-making.• Ethical leaders are competent managers who take a

holistic view of the firm’s ethical culture.

The most successful leaders do not rely on one style of

leadership but alternate their technique based on the characteristics of the situation.

.

• Tata Group had sought to function with ethics, integrity, social consciousness and fairness.

• The Group strategy of leadership with trust sought to achieve higher value for its stake holders, better returns for society, and an ethical model of business.

• The group had always been recognized as a value driven organization.

• A unique feature of the group was that 63% of Equity capital of Tata Sons was held by Tata Trust, which were philanthropic in nature.

LEADERSHIP WITH TRUST

CONTD…• Besides the trust activities, like hospitals, education and research centre etc.

individual group companies had taken a community development.

• Employee welfare measures were also one of the major focus area of the group.

• Environment protection were also figured high on the list of priorities.

• To ensure that CSR measures started by the group were sustained a “social audit” was also carried out.

• In order to align its CSR initiatives with business processes the Tata Group made efforts to develop mechanism for integrating social responsibilities with corporate excellence. The Group focused on developing partnership for benchmarking with the UN development program, global reporting initiative, the global compact, ford foundation and the confederation of Indian Industries

Tata Group Purpose and Core Values• Integrity• Understanding• Excellence• Unity• Responsibility

2G Scams and the Tata’s

Key Players:• A.Raja• Ministry of Communication and Information Technology• Niira Radia• R.K Chandolia• CBI

Time for a leadership transition• The aim of the Tata group is to build multinational

businesses that would achieve growth through excellence and innovation.• Biggest Challenge: Retaining Tata group’s value

system.• August 2010: Tata Group created a 5 member

committee to find successor of Ratan Tata.• 2011: Cyrus Mistry (a construction tycoon, single

largest shareholder of Tata Sons with 18% stake) elected as a Chairman of Tata Group