Tatas are in the news with questions about corporate governance, the mission of the Tata Trusts, and how the Tata Group serves the nation.
The Tata story is a story of the growth of modern industrial India. It goes back 125 years, and it spans many generations. The Tata Trusts are only a part of the Tata story. The real story is how Tata companies built many industries when business conditions were very difficult within India, and often in the face of foreign competition.
JRD Tata, Chairman Emeritus of Tata Sons, described this philosophy best: “In half a century and more of industrial pioneering, the wealth gathered by Jamshetji Tata and his sons forms but a minute fraction of the amount by which they enriched the nation. The whole of that wealth is held in trust for that nation’s exclusive benefit. The cycle is thus complete, what comes from the people goes back many times over.”
Sumant Moolgaokar, Chairman Emeritus of the Tata Engineering and Locomotive Company (TELCO, forerunner of Tata Motors), and Vice-Chairman of Tata Sons, worked alongside JRD Tata, building Indian industry after India’s independence in 1947. He said a nation needs wheels to build its economy, viz, trucks and buses to carry goods and people. Also, roads for the trucks and buses to run on. It was a nation builder’s duty, he said, to employ Indian youth and enable them to learn to do what they could not do before; and, with them, build an Indian industry and the nation with it.
Moolgaokar wrote in his Chairman’s annual report to TELCO’s shareholders in July 1977: “The success of our Company is founded in the quality of our employees. If there is one thing which has become apparent, it is how much the success of the Company’s success is due to the caliber of our employees at all levels and to the highly developed team spirit which is to be found in our organization. We would like to take this opportunity to express our gratitude and to pay tribute to the support which the Company receives from all its workers and staff. With their devotion and hard work, we shall continue to improve our performance and place the Company in a stronger position than ever before.”
Moolgaokar meant what he said and did what he said. When Tatas were given a large tract of barren land outside Pune in the late 1960s with not a tree on it, there were three things he did before the factory was built. The first was to set up the country’s finest training school in which hundreds of young Indians went through a three-year training programme to learn the high levels of skills they would need to operate the machinery in the factory as soon as it was installed. The second was to build an Engineering Research Centre (ERC) to develop Indian R&D capabilities with which the company could produce its own designed trucks and become less reliant on foreign technology. In the ERC, Indian engineers were given freedom to design and test new vehicles on modern test equipment and a large test track and thereby build their own confidence. The third was to plant a hundred thousand saplings and young transplanted trees across the barren land.
The more financially inclined members of the company board said it was foolish to spend so much time and money on, what appeared to them to be unproductive investments with no immediate returns. Moolgaokar replied that the two resources that take the longest to grow are trained people and tall trees. Therefore, one must invest in their growth well before making other investments.
Sumant Moolgaokar was awarded the Sir Jehangir Ghandy Medal for Industrial Peace by XLRI Jamshedpur (India’s oldest management school) in 1984. He said in his acceptance speech: “There is this belief even among the leaders of men in our country, that our culture and our Indian character cannot allow our people to attain consistent high standards, that shoddiness and carelessness are our God-given, unalterable way of life. But, if, with faith in them, you ask our men for the best, they rise to your belief in their worth and create a momentum for improvement that results in high standards in many things they do.”
Nations and their industrial capabilities are not built by one generation. Every generation builds upon the foundation its elders build for them. There is currently a heated debate among Indian economists now about why Indian industrialists are not making enough long-term investments in R&D and in training and employing more skilled workers. On one side of this debate are proponents of ‘free markets’, in which investors must respond to market forces. Their explanations are the failures of ‘labour markets’ and insufficient incentives in ‘financial markets’. On the other side are economists with ‘cultural’ explanations for the short-sightedness of Indian entrepreneurs.
The truth is, it is not Indian industrialists (or industry builders anywhere) who are short-sighted. Stock markets are extremely short-sighted. CEOs are expected to provide stock markets with quarterly guidance about how much the company’s revenues and profits will grow in the next quarter. Stock market investors would have been alarmed by Moolgaokar’s annual report to the company’s investors.
Steve Jobs invested in R&D because he had a passion for it. His driving ambition was not the billions of dollars his stock in the company would be worth. He wanted to create an unusual product which no one else could conceive of. JRD Tata wrote a tribute to Moolgaokar. He said, “Sumant Moolgaokar had a vision which enabled him to look much beyond merely constructing a factory. From the start, he was 20 years ahead and perhaps more.”
The Tata Group has long been a nation-builder. The people of India have trusted them because they have, until recently, always put the demands of the nation ahead of the demands of stock markets.
What is at stake in the present conflict within the Tata Trusts and the Tata Sons’ board is whether the decisions of leaders of Tata Sons and all Tata companies will be guided hereafter by market valuations rather than by the long-term needs of India.
The Tribune, now published from Chandigarh, started publication on February 2, 1881, in Lahore (now in Pakistan). It was started by Sardar Dyal Singh Majithia, a public-spirited philanthropist, and is run by a trust comprising five eminent persons as trustees.
The Tribune, the largest selling English daily in North India, publishes news and views without any bias or prejudice of any kind. Restraint and moderation, rather than agitational language and partisanship, are the hallmarks of the newspaper. It is an independent newspaper in the real sense of the term.
The Tribune has two sister publications, Punjabi Tribune (in Punjabi) and Dainik Tribune (in Hindi).
Remembering Sardar Dyal Singh Majithia
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