The Tata Group is currently in the news amid questions about corporate governance, the mission of the Tata Trusts, and how the conglomerate serves the nation. However, the Tata story is fundamentally a story of the growth of modern industrial India, spanning 125 years and multiple generations. The Tata Trusts are only one part of this narrative; the real story is how Tata companies built numerous industries when business conditions within India were very difficult, often facing foreign competition.
JRD Tata's Philosophy of Trust
JRD Tata, Chairman Emeritus of Tata Sons, encapsulated this philosophy: "In half a century and more of industrial pioneering, the wealth gathered by Jamshetji Tata and his sons forms but a minute fraction of the amount by which they enriched the nation. The whole of that wealth is held in trust for that nation's exclusive benefit. The cycle is thus complete, what comes from the people goes back many times over."
Sumant Moolgaokar's Vision for TELCO
Sumant Moolgaokar, Chairman Emeritus of the Tata Engineering and Locomotive Company (TELCO, forerunner of Tata Motors) and Vice-Chairman of Tata Sons, worked alongside JRD Tata to build Indian industry after independence in 1947. He believed a nation needs wheels—trucks and buses—to carry goods and people, as well as roads for them to run on. He saw it as a nation builder's duty to employ Indian youth, enable them to learn new skills, and build Indian industry and the nation together.
In his Chairman's annual report to TELCO's shareholders in July 1977, Moolgaokar wrote: "The success of our Company is founded in the quality of our employees. If there is one thing which has become apparent, it is how much the success of the Company's success is due to the caliber of our employees at all levels and to the highly developed team spirit which is to be found in our organization. We would like to take this opportunity to express our gratitude and to pay tribute to the support which the Company receives from all its workers and staff. With their devotion and hard work, we shall continue to improve our performance and place the Company in a stronger position than ever before."
Investing in People and Trees
Moolgaokar's actions matched his words. When Tatas received a large tract of barren land outside Pune in the late 1960s with no trees, he undertook three initiatives before building the factory. First, he established the country's finest training school, where hundreds of young Indians underwent a three-year programme to acquire high-level skills for operating machinery. Second, he built an Engineering Research Centre (ERC) to develop Indian R&D capabilities, enabling the company to produce its own designed trucks and reduce reliance on foreign technology. Indian engineers were given freedom to design and test new vehicles on modern equipment and a large test track, building their confidence. Third, he planted a hundred thousand saplings and young transplanted trees across the barren land.
Financially oriented board members criticized these investments as unproductive with no immediate returns. Moolgaokar replied that the two resources that take the longest to grow are trained people and tall trees, so one must invest in their growth well before other investments.
Moolgaokar's Belief in Indian Potential
In 1984, Moolgaokar received the Sir Jehangir Ghandy Medal for Industrial Peace from XLRI Jamshedpur, India's oldest management school. In his acceptance speech, he said: "There is this belief even among the leaders of men in our country, that our culture and our Indian character cannot allow our people to attain consistent high standards, that shoddiness and carelessness are our God-given, unalterable way of life. But, if, with faith in them, you ask our men for the best, they rise to your belief in their worth and create a momentum for improvement that results in high standards in many things they do."
Long-Term Investment vs. Short-Term Markets
Nations and their industrial capabilities are not built by one generation; each generation builds upon the foundation laid by its elders. There is currently a heated debate among Indian economists about why industrialists are not making enough long-term investments in R&D and in training and employing more skilled workers. Proponents of 'free markets' blame failures in 'labour markets' and insufficient incentives in 'financial markets'. Others offer 'cultural' explanations for the short-sightedness of Indian entrepreneurs.
However, it is not Indian industrialists who are short-sighted—stock markets are extremely short-sighted. CEOs are expected to provide quarterly guidance on revenue and profit growth. Stock market investors would have been alarmed by Moolgaokar's annual report. Steve Jobs invested in R&D out of passion, not for billions in stock value. JRD Tata wrote a tribute to Moolgaokar, saying, "Sumant Moolgaokar had a vision which enabled him to look much beyond merely constructing a factory. From the start, he was 20 years ahead and perhaps more."
The Current Challenge for Tata Group
The Tata Group has long been a nation-builder, and the people of India have trusted them because they have always put the nation's demands ahead of stock market demands. At stake in the present conflict within the Tata Trusts and the Tata Sons board is whether future decisions of leaders will be guided by market valuations rather than the long-term needs of India.
