Newsweek has a nice little article on the Tata Group.
Tata is a window into the rise of India. While that rise is often traced to free-market reforms that began in the early ’90s, Tata executives emphasize that even now, the company grows despite obstacles thrown up by red tape and special interests. Unlike China’s boom, which was orchestrated by the state, India’s is primarily the story of an enterprising private sector. Often seen in the United States as an outsourcing economy that threatens to siphon off service jobs, India’s wider potential is mirrored in the range of Tata’s ambitions—from luxury hotels and jewelry to a planned $2,000 car.
In recent years, as Tata began listing some of its affiliates on Wall Street, Americans often compared Tata to the model —conglomerate they know best: General Electric. But CEO Ratan Tata, 67, is no Jack Welch. “Certainly not,” he says. Tata executives, many armed with Western M.B.A.s, have all read about Welch, and dismiss many of his American tactics—from mass layoffs to hostile takeovers—as violations of the Tata way. Ratan Tata says his company is not driven to grow “over everybody’s dead bodies.” Some 66 percent of the profits of its investment arm, Tata Sons, go to charity, and executives make clear they have no intention of relinquishing control to Wall Street. At Tata, “corporate social responsibility,” to use the Western buzzword, has real money behind it.
That’s all laudable, but can Tata remain true to its liberal roots as it goes global? Since 2000, Tata has acquired Britain’s Tetley tea, the truck division of South Korea’s Daewoo Motor and Singapore’s NatSteel. Yet it’s also moved into markets where Western multinationals dare not tread, including Bangladesh and Africa, where Tata has assumed the role of a for-profit development agency. However far-flung those markets, they are near in spirit to the social experiment of Jamshedpur (population: 800,000), the steel town Tata carved from the jungle a century ago. It still pays full health and education expenses for all employees, and runs the schools and a 1,000-bed hospital. The city looks frozen in time about 1960, when Tata Steel was still inspired by Soviet planners, yet the mill is one of the newest in the world. Since 1991, Tata has spent $2.5 billion replacing century-old machines and cutting the work force from 78,000 to 45,000 in a downsizing so well managed, steel-union president R.B.B. Singh says, “all the employees… have no regrets at all.”
Tata’s long standing position on corporate social responsibility may be in direct opposition to the main libertarian free-market idea forcefully stated by Milton Friedman in his 1970 article “The Social Responsibility of Business Is to Increase Its Profits.” Maybe not. Reason has opened up a debate on the issue with John Mackey of Whole Foods taking on Milton Friedman and T J Rodgers of Cypress Semiconductor. Reason wants this to be a starting point of a discussion that should be intensely important to all devotees of free minds and free markets. Maybe they should ask Ratan Tata to join in!