BackTata Steel: A robust, ethical board
The Aon Hewitt study team finds a strong culture of governance built over generations of policies
Premium(A file photo of Tata Steel plant in Jamshedpur, Jharkhand. The composition of the board is diverse with experiences across multiple aspects of businesses and geographies, says the study.)
Mumbai: Tata Steel Ltd (established in 1907 as Tata Iron and Steel Co. Ltd, or Tisco, by Jamsetji Tata) is the largest private sector steel maker in India. It also ranks among the top 10 steel companies in the world with an annual capacity of around 28 million tonnes per annum. The company, with 81,000 employees, earned $26.13 billion (around ₹ 1 trillion today) of revenue in fiscal 2011-12.
Tata Steel’s acquisition of Anglo-Dutch steel maker Corus Group Plc. in 2007 was a turning point for the company, catapulting it into becoming one of the largest steel makers in the world.
Tata Steel’s $12.04 billion Corus acquisition was challenged by Brazilian steel company Cia. Siderurgica Nacional SA (CSN) and the deal took over a year to close, concluding with an auction that saw Tata Steel outbid CSN. Though the Corus acquisition augmented Tata Steel’s capacity, the European operations face numerous challenges with the slowdown in the continent denting demand for steel, which reflects in the company’s overall financials.
Tata Steel’s main production facility in India is located at Jamshedpur in Jharkhand. It is in the process of augmenting capacity at the site. The company also plans a major steel making facility in Kalinganagar, Orissa. Tata Steel’s greenfield project in Orissa ran into rough weather over land acquisitions issues, which has delayed the project. The land acquisition issues were subsequently sorted out and the plant is under construction.
Ratan Tata, chairman of Tata Sons Ltd, the holding company of the Tata group, is currently Tata Steel’s chairman as well. With the 74-year-old Tata stepping down as chairman of Tata Sons later this month after he turns 75, his successor Cyrus Mistry will likely become the next chairman of Tata Steel. Mistry was inducted as a non-executive member of Tata Steel’s board in November 2011. H.M. Nerurkar is the current managing director of the company.
The Aon Hewitt study team found a strong culture of governance built over generations of policies and processes that are strongly entrenched in the company.
The sustainability of these processes is one of the key reasons for rating Tata Steel as having a best-managed board.
The company and individual members of the board have a very high personal and professional reputation for capability and integrity.
The composition of the board is diverse with experiences across multiple aspects of businesses and geographies. The study team found the board processes and constitution robust and having the potential required for a global board.
“The board structure represents a strong focus on driving good governance and ethical management. Tata Steel is one of the few companies that have a multi-tier governance structure for its international as well as local business reporting," said the Aon Hewitt study team.
“The board maintains high focus on compliance as well as structured reporting and communication with all the stakeholders which helps self-percolate the good culture of governance to the lowest levels in the organization. It is one of the two Indian companies on the list of World’s Most Ethical Companies released by the Ethisphere Institute and also one of the first companies to implement social accountability standards," the study team said.
Tata Steel’s board has 12 members, half of whom are independent directors. Koushik Chatterjee, group chief financial officer of Tata Steel, said the quality of corporate governance in a company is determined by the quality of directors who sit on the board of these companies and not by adhering to check lists, which is more the job of the regulator.
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