Tata Steel: Does Compassion have a Price? - India's Biggest Steelmaker: A Century of Corporate Social Responsibility

Tata Steel of India has been viewed as a global model of corporate social responsibility for over a century. But the past decade has seen it downsize and cut operational costs dramatically. Associate Professor of Management Jean-François Manzoni, Senior Affiliate Professor of Marketing Vikas Tibrewala and Research Program Manager Kathryn Hughes offer a comprehensive evaluation of this remarkable company as it endeavours to remain true to the vision of its founder in today's trying times.

by Jean-François Manzoni,Vikas Tibrewala, Jean-Louis Barsoux
Last Updated: 23 Jul 2013

Tata Steel has had a unique affect on both the industrial and social development of India for well over a century. The country's largest private steel maker introduced a wide array of progressive industrial policies, often well before even its contemporaries in the West. Its remarkable sensitivity to employee needs has been demonstrated by universal health coverage; childcare and free schooling, rewards for worker loyalty and a host of other initiatives reflecting Tata's declared philosophy that social responsibility is good for a company's bottom line - particularly in a country with so few social safety nets. At the start of a new millennium, however, the corporation may no longer be able to fully escape the pressures now faced by the industry as a whole. Steel prices had been depressed for many years, due mainly to global overproduction, and a greater number of shareholders would likely make it harder for Tata to maintain its historical level of close community support.

INSEAD Associate Professor of Management Jean-François Manzoni, Senior Affiliate Professor of Marketing Vikas Tibrewala and Research Program Manager Kathryn Hughes offer a comprehensive evaluation of this remarkable company as it endeavours to remain true to the vision of its founder in today's trying times. The past decade has seen Tata downsize and cut operational costs dramatically. To the initial alarm of many workers, it began outsourcing many of its non-core services, such as electricity and water provision in the late 90s. At the end of 2001, Tata announced Vision 2007, its new vision statement. Its two main objectives: do whatever may be deemed necessary to become an EVA-positive company, while still continuing to improve the life quality of employees and the community at large.

The authors explore the remarkable levels of support and loyalty demonstrated towards Tata by its workers over the decades. There have been no strikes since 1928, and employees have even physically resisted outside "agitators", including national union representatives. (The unions even agreed to the recent downsizings.) Attempts by national and state governments at directly intervening in Tata's affairs have also been consistently met with mass popular opposition.

One of Tata's finance directors admitted that the corporation's reasoning behind its social commitment was "not altruistic, [but rather] enlightened self-interest." Indeed, a strong case could be made that, in light of the tremendous political and social upheavals that have struck modern India, the company simply would not have survived without the dogged loyalty of its managers, workers and other townsfolk in a region Tata was almost wholly responsible for making economically viable.

But naturally, both foreign and domestic observers - and especially some foreign shareholders - are questioning Tata's ability to remain true to its original values as part of an industry many feel to be in structural decline. While the level of foreign ownership remains relatively small, India has experienced a remarkable boom in domestic shareholding in recent years resulting from widescale liberalisation. While senior managers have frequently pointed out that "people within the Indian context support our efforts", is this sustainable while the "Indian context" is itself going through such radical changes? In Muthuraman's words, "there is no room for compromise. The reality is that, for us, it's not about choosing between the two pillars [of Vision 2007], it's about ensuring that we do both."

INSEAD 2004

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