The Tatas and a matter of trust
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“The Tata Trusts regret the trust deficit between the (former) Chairman of the Tata Group and the Trusts,” a spokesperson of the trust said after the group’s board unceremoniously fired the chairman. If there is one word that describes the character of the Tata group and the Tata brand, it is “trust”. The Tata group has a unique structure in which 66% of shares in the group’s holding company, Tata Sons Ltd, are owned by charitable trusts. The profits of the group’s companies enable the trusts to address wider societal issues. The Tata brand’s distinction is the trust of society earned by the values by which the Tata group and its companies operate.
The Tata group earned this trust by consistency in its values through good and difficult times. The remarkable trust of Indians in the Tata brand and its values 50 years ago saved me from a lot of embarrassment when I returned from my first overseas trip in 1969.
In those years, foreign travel was extremely restricted. The Reserve Bank of India (RBI) would provide a very small allowance in foreign exchange only for a few days. Moreover, import restrictions were severe: travellers could bring back only Rs500 worth of goods. I was returning after seven days in Singapore on a business trip, for which I had been allocated a total of £60 for hotels, food, and transport.
Colleagues and friends were expecting me to bring something “foreign” back for them. I could save very little, with which I bought a bag-full of cheap ball pens and toys from the Chinese emporium as gifts for them.
The customs agent at the airport made me empty the whole bag and strew everything to the amusement of others in line at the customs clearance counter. Their amusement turned to irritation as the customs agent made me produce the bills to prove that all that stuff could be worth less than Rs500. A senior customs officer intervened. “What is the problem?” he asked the agent. “This man says all this stuff costs less than Rs500!” the agent replied. “Where do you work?” the officer asked me. “Tata Steel”, I replied. The officer turned to the agent and said, “If he says it is worth less than Rs500, then it must be so. Tata people always tell the truth.” And with that, he started to put my stuff back into my bag!
Ten years later, when I was working with another Tata company, Telco (Tata Engineering and Locomotive Co. Ltd), now known as Tata Motors, other anecdotes brought home to me how Tatas had earned their reputation as trustworthy partners. In the 1970s, Tatas set up their first foreign production facility—an assembly plant for commercial vehicles in Malaysia—as a joint venture with Malaysian partners who were responsible for the financial and commercial management of the venture.
The company struggled to make a profit and its bankers decided to recall their loan. The chief executive officer of the bank, an Australian, came to Mumbai to give an ultimatum to Tatas, which he had already given to their partners in Malaysia. Either put in more money or the company would have to be wound down.
This would be a big blow to Tatas’ reputation but they were unable to remit any money on account of RBI’s restrictions. All Tatas could do was to give a one page letter of assurance that they would do their utmost by sending more managers to turn the company around.
The banker realized that was all that he could get but he wondered what that piece of paper and its assurance was worth. So he asked Deutsche Bank in Germany, who had been bankers to the Telco joint venture with Daimler Benz. The bank told him that a letter signed on the Tata letterhead by the CEO of a Tata company was better than the financial guarantee of a bank!
Why did Deutsche Bank think so? Another anecdote. I was in Malaysia to turn around the Malaysian joint venture company, and the chairman of the company invited me to meet directors of KraussMaffei, the large German engineering conglomerate, with whom he was negotiating another venture. When they heard I was from Tatas, they told this surprising story of what the Tata word meant and the Tata brand stood for.
They said, in 1946, soon after World War II had ended, the KraussMaffei board met J.R.D. Tata (chairman of the Tata group) and Sumant Moolgaokar (CEO of the fledgling Telco) on the platform of the bombed out Munich station. India was under British rule, and German and Indian companies could not make any legal agreements among themselves. The Germans requested Tatas to take their best technicians and their families to India, who were starving without work in Germany. They will teach you all they know; please take care of them, is all we can ask, they said. And thus Tatas learnt metal-working from the best of the best.
Many years later, they said, when India had gained independence from the British, a letter arrived at their headquarters from Tatas. Now that we can, how much shall we pay you for the technology you have provided us, it asked. That letter, they said, is a legend in our company of what trust means. You honour your debt, even when it is not legally binding, and even when it is not demanded of you.
Trust is not built through legal contracts between parties. It is built by doing the right thing by others always. The more often leaders and organizations have to say, “Trust us. Surely you know who we are”, but are not perceived to be fair and transparent, the faster they will lose hard-earned trust. A reputation of trust is a slippery slope: hard to climb, easy to slide down.
Arun Maira served in the erstwhile Planning Commission.
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