Of Business Ethic and Ethics

Cover of book on Mr. Ratan Tata 

The chairman of Tata Trusts and former chairman of Tata Sons, Mr. Ratan Tata, passed away on the 10th of October. The last two days have been filled with coverage of Mr. Tata's contributions to the country, the economy, and the global business world. Numerous articles and reports highlight his contribution primarily as a great philanthropist who worked for the cause of ethical business, which the Tata Group has been known for over the last 100+ years. While narrating how Mr. Tata's contribution was acknowledged in her school, even my daughter told me that they were told Mr. Tata was a great philanthropist. 

I have been a little taken aback because most media and people have focused on his philanthropy and not his business achievements or entrepreneurship-related activities. This got me thinking about how I view the transformation that Mr. Tata brought about during his tenure as chairman of Tata Sons, where his contribution was far more pronounced on work and business Ethic than just the Ethics.

Business Ethics

The term "Business Ethics" takes me back 20 years, to my Business School days where we were taught the subject of Business Ethics in one of the most innovative ways I have ever experienced. To be honest, when I first read the name of the subject as part of our course outline, I cringed at the thought of attending another moral science class. But our professor, Dr. Dhun Dastur [1] (another Parsi, by the way, like Mr. Tata), had a very unique way of teaching the subject of business ethics. Looking back, I can confidently say this was probably the most interesting and fun pedagogy across all the MBA subjects. Dr. Dastur's way of teaching us business ethics was to give us a full theatre experience of some of the most iconic Hollywood movies showcasing business and entrepreneurship - our course content consisted of watching, researching, and then analyzing and debating movies like Erin Brockovich, Jerry Maguire, and of course, Wall Street. 

Remember, this was the early 2000s when streaming media was not yet invented, and the only way to get access to good movies was by renting video cassettes and later CDs from the local video shop and watching them at home in front of the whole family. Watching movies on the computer by loading a CD was just a few years old concept, which is why, unless the movie was either called out as a blockbuster (for example, Jurassic Park), it was unlikely that we would have watched it. Long story short, this was my first exposure to Gordon Gekko, Jerry Maguire, or Erin Brockovich.

For those who don't know the plot of these movies, all three of them focused more on what business ethics is not than what business ethics is. And indeed, that's the best way to teach young students about business ethics — how your entire world can fall apart on you when you are rising too fast and making billions like Bud and Gordon Gekko, or how you relate to the guilt that Jerry undergoes towards the second half of the movie, or how Chemical pollution impacting the community is as much a crime as the Holocaust, are the best ways to explain business ethics to a bunch of students in their 20s.

However, when you look at what the Tatas have achieved, it is not merely the avoidance of incorrect business practices but a perpetual tradition of combining wealth generation with social good, either in the form of philanthropy or in the form of institution building. Some of the most iconic institutes in India, whether it is the IISc or TIFR or TISS, were founded by the Tatas with their own money and later gifted to the nation once they were built. This goes well beyond the limited confines of donating your wealth to charity but into defining what it means to do ethical business and investing business growth into social good.

Another aspect of ethics exemplified by the Tatas is the spirit of co-option, cooperation, and camaraderie with other business groups rather than rivalry with any of the competitors. The Tatas have so many joint collaborations with other companies across the globe. But what stands out is that irrespective of the status of the joint venture, the ultimate enterprises are always run with a very high degree and standard of corporate governance and values. One of the most striking examples of this was the bailout of Tata Finance [2]. There are so many companies within the Tata Group where Tatas may not own the majority stake, however, they undertake the responsibility to ensure extremely high standards of corporate governance. This, in my opinion, has been the greatest contribution of the Tata Group to the entire industry, as being the standard-bearer for what good corporate governance should look like. Prudent Corporate governance is probably the more important part of business ethics, than philanthropy alone.

Lastly, one personal aspect of Mr. Tata's journey worth mentioning ethics is at the very beginning of his working career when he returned to India from Cornell. For someone like him, coming from a wealthy background and having received education at an elite US school, it was quite easy to join an Investment Banking firm in the Wallstreet and live a life of comforts, until the decks were cleared to simply join the the Tata's back later in life as a board member. However, he chose an unpretentious path of utmost perseverance, firstly returning to his motherland and then joining as a common executive learning the ropes ground up and rising up the ranks like a commoner. That patriots don't just fight at your borders, but the attitude is reflected across aspects of life, was exemplified by the young Ratan with his deeds.

Ratan Tata, in his actions and his deeds, not only continued but amplified and improved upon this aspect of business ethics throughout his career and association with the business world. However ...

Business Ethic

Tata's have always been known for their high standards of ethics and corporate governance, but what Mr. Ratan Tata contributed more, not just to the Tata Group in particular, but to the entire Indian business ecosystem in general, was his drive for dynamism in the corporate work culture in India. When Mr. Tata took over the reins of the Tata Group, the shadow of his predecessor JRD Tata loomed very large over the group, and more importantly, Ratan was one of the younger executives in the larger Tata Group. Tata Group cash houses like Telco (which is now called Tata Steel), Tata Chemicals and Indian Hotels (the famed 'Taj' brand) were helmed by Russi Mody, Darbari Seth and Ajit Kerkar (the so-called ‘satraps’). This was the early 90s when the Tata Group's imprint was quite similar to the state of the larger Indian economy per se. Just like the economy had large but slowing down and archaic public sector units (PSUs) running the country's sluggish economy, Tata Group's businesses were not very different, and more importantly, the leadership itself was ageing, tepid, and bureaucratic in its decision-making. While it took him some time, but slowly and steadily, and then rapidly, the young Ratan infused a different kind of entrepreneurial spirit within the Tata Group's endeavors. He pushed for modernization, he pushed for greater risk-taking, he pushed for an impetus on innovation within the group, and he pushed to meet the needs and aspirations of a young India that, thanks to the liberalized economic policies of the government, was also embracing change at a very thirsty pace. [3]

In this journey to inject the group with the spirit of risk-taking and innovation, Mr. Tata suffered many setbacks. Many of his projects and investments did not bear fruit at first attempt and were often declared dead upon arrival by the old guard within the group. But he fought on and ultimately prevailed, and his experiments started seeing success - whether it was the plunge into the private vehicle space with the Tata Indica, or his focus on affordable transportation with the Tata Nano, or his drive to acquire larger global international enterprises, like Tetley, which in some cases were larger than the original businesses that the Tata Group was running within the confines of India. Mr. Tata's career was written off several times repeatedly, even after he gained success in his previous overtures.

There is a lot to read about his business success, and hence I am not going to repeat them. What I will conclude with is that the tapestry of the Tata Group footprint that we see today — a global conglomerate with business interests in several countries (notably it is the largest business group in the UK, which was the former master of its colony in India, which the Tatas call their home) — driven forward in businesses from electrical vehicles to contributions in space technology, telecom, internet services, and most importantly, information technology services, F&B retail, F&B wholesale, and fashion retail, is radically forward looking and future ready, compared to the group that he inherited.

The last and probably most important contribution of Mr. Tata has been to take responsible risks in the area of succession planning. Mr. Tata allowed Cyrus Mistry to become the first non-Tata surname chairman of the Tata Group, an experiment that did not bode well, just like several of his other business experiments. But like always, he did not let this one failure deter him from bringing in N. Chandrasekaran, another non-Tata and, more importantly, not from the owning families of the Tata Trust, to be nominated as the next chairman. And I am sure the last few years of the Tata Group's performance are evidence of the fact that his faith in continuing his experiment has paid off this time as well, just like it paid off in his other business ventures. Tata Group is in able hands and led by a strong philosophical base that it cannot lose its way again.

In closing, there is so much to learn from the Tatas, and Mr. Ratan Tata in particular, on how to do ethical business, but there is an equal amount of learning to be had by studying the way he transformed the Tata Group and its businesses for entrepreneurs and business leaders who want to get inspired to take risks in a responsible manner, yet with the conviction to succeed.