Tight Rope Walk at Tata Steel: Balancing Profits and CSR[Psi]

Now in its centennial year, Tata Steel is among India's largest and most renowned companies. With a consistent track record in the past, it is poised for dramatic growth in the future-both in India and abroad. Since its inception, Tata Steel has been deeply committed to sharing its wealth and prosperity with disadvantaged communities around its operational sites. It voluntarily ploughed large sums of money into redressing a range of social problems-much before 'Corporate Social Responsibility (or CSR)' formally entered the vocabulary of management texts. This case study describes the company, its underlying value system, and its wide portfolio of social programs. In the process, it also triggers a debate over future course of action. Can Tata Steel afford to maintain its traditional CSR strategy? In view of increasing competition, and the importance of cost competitiveness, has the time come for a comprehensive review of all that the company does and the way in which they are done? It was an anticlimatic question. In the teak-paneled boardroom of Tata Steel, a senior executive had just completed an impressive, somewhat self-congratulatory, presentation on the extensive range of social activities undertaken by the company in and around the east-Indian city of Jamshedpur. In the audience were 35 fast-track foreign executives of leading global companies registered for the prestigious IMPM¥. They were on a day's trip to observe management practices at this premier Indian company. Instead of the overawed appreciation that Tata Steel's executives had become accustomed to at the end of such presentations, one of the foreign delegates piped in: "But why are you wasting so much of shareholders' money on activities that clearly fall within the purview of local or state governments? Why don't you stick to your main business? "It was an anticlimactic question. Other keen observers of Tata Steel such as financial analysts, management consultants, and the business press have subsequently picked up this refrain. Faced with repeated questioning of this nature, the company's top management is engaged in an intense debate: How to strike a balance between its primary objective of enhancing shareholder wealth, and its equally deep commitment to the welfare of the communities around it? PROFILE OF TATA STEEL Tata Steel, which began operations in 1907, is the oldest, and undoubtedly the best-known steel company in India. On the verge of completing a century in business, it is widely respected for the professionalism of its management, consistent performance record, employeeorientation, adherence to core 'Tata Values', and its social-consciousness. Many of these qualities are the direct legacy of its Parsi (or Zoroastrian) founder: Jamsetji Nusserwanji Tata (1839-1904). A true visionary-more of a nationbuilder than a wealth-seeking industrialist-he stood apart from his peers. Unlike them, he was not satisfied with accumulating easy wealth from the lucrative trade in the agricultural commodities that India was famous forand this had attracted the British to colonize the country. Instead, he set out to lay the foundations of a modern, manufacturing-based economy; he considered this as a prerequisite for attaining political independence. With dogged determination, he overcame all the obstacles placed in his way by the colonial powers of his era and eventually succeeded in giving India its first integrated steel plant (now Tata Steel), its first power generating company (now Tata Power), and its finest technical institute (the Indian Institute of Science in Bangalore). His successors went on to expand the Tata industrial empire to a group of over 85 companies spanning a variety of industries including: metals, automobiles, engineering, aviation (now nationalized), IT, telecommunication, chemicals, finance, tea, and hotels. They have a combined turnover of around $23 bn. But throughout this expansion, they stuck to the founder's core values: concentrate on nation-building activities; plow back the wealth generated from efficient business in the communities where it was earned; treat employees as the producers of its wealth-and therefore, as members of the Tata 'joint family"; and treat all other stakeholders with due respect and fairness. …