Tight rope walk at Tata Steel:

Balancing Profits and CSR

Group-5

Profile of Tata Steel

Founded by Jamsetji Nusserwanji Tata in 1907

Flagship company of Tata group
Headquartered in Mumbai, most operations in
eastern India
Its integrated steel plant is in Jamshedpur, its
captive collieries and iron ore mines are in
Jharkhand and Odisha
Oldest and best known steel company known
for professionalism of management, consistent
performance
record,
employee-orientation,
adherence to core Tata values and its social
consciousness

History

Post independence

Steel industry reserved for public sector

Prevented to grow beyond initial capacity
Major decisions made by bureaucrats in Steel Ministry
Only very few modest returns
Over-manned (nearly 80000 employees at one stage)

Post LPG in 1991

Sustained modernization to upgrade and expand its

steel-making capacity
Changes in overall organizational design,
management systems and practices
Reduced workforce to around 37000

First social move

Method used in reduction of employee

strength post LPG from around 80000 to
27000 was unparalleled in the world
Surplus employees were given the option of
accepting a separation package that assured
them a regular, monthly salary (minus perks
and further contributions to retirement
benefits) until their due date of retirement at
the age of 60 years. The monthly salary was
pegged at least at the level at the time of
separation; in many cases, it was increased by
25% to compensate for expected inflation.

Jamshedpur the steel city

Reasons for being selected as the site of plant

Location at confluence of two perennial rivers

Proximity to iron ore and coal mines
Lay along the railway line two of Indias largest
commercial centres : Mumbai and Kolkata

Still a company town (no elected municipal body; Tata

administering, doing town planning and providing civic
amenities)
Reasons for formation of JUSCO (Jamshedpur Utilities
& Services Company)

Higher efficiency due to autonomy

Exploring new business opportunities
Reduction in Tata Steels employee cost

Employee Welfare

Tata has consistently gone beyond industry

standards and legal requirements to take care of
its employees.
Has registered a number of firsts in terms of
employee measures
Tata Steel is known for

Working together
75 years of industrial harmony
belongingness

Critics view

No more innovations in welfare programs

All inclusive joint family mindset to pragmatic leanand-mean nuclear family mindset

The social side of Tata Steel

Social policy - "Tata Steel believes that the

primary purpose of a business is to improve
the quality of life of people...(It) will volunteer
its resources, to the extent it can reasonably
afford,
to
sustain
and
improve
the
environment, and the quality of life of the
people of the areas in which it operates
earned the sobriquet of being the company
'that also made steel'suggesting that it often
gave the impression of being primarily a
social, rather than a business, organization

Delivery Vehicles

Coordinated by following departments

belonging to the Social Services Division
CDSW (Community Development & Social
Welfare)
TSRDS (Tata Steel Rural Development
Society)
Tata Steel Family Initiatives Foundation
TCS (Tribal Cultural Society)
Sports and Adventure

Portfolio of Programs

INCOME GENERATION PROGRAMS

HEALTH CARE AND HYGIENE
EDUCATION
RELIEF OPERATIONS
SPORTS AND ADVENTURE
TRIBAL WELFARE
PHILANTHROPY
CIVIC ADMINISTRATION
ENVIRONMENT MANAGEMENT

Social Audit

In 1980, Tata Steel decided to subject its

social work to independent scrutiny. Therefore, it
constituted a 'Social Audit Committee' consisting
of three eminent persons: one retired Supreme
Court judge, and two distinguished academicians.
The committee concluded: "The company has not
merely fulfilled the dream of its founderbut has
gone far beyond it.....
Since then, two more audits were conducted at
the turn of each subsequent decade. The general
tone of their final conclusions was quite similar.

The ongoing debate (Point : Reduce

CSR Expenditure)
Five possible ways
Consolidate the various departments
engaged in social work into one.
Only a small, core policy-making team
should be on the rolls of the company.
Streamline the programs portfolio.
Instead of doing everything itself, it should
engage more specialized NGOs.
Through the NGOs, it should also seek
project funding from donor agencies.

Viewpoints on reduction of CSR

expenditure

Independent observers point out that instead of

collaborating with one another, the different Tata
companies in Jamshedpur prefer to go their own
separate ways.
Investors say Tata Steel could afford to assume a
wide range of costly CSRs and simply pass the bill on
to customers.
There is also a thought that many programs are
continued out of blind faith' rather than pragmatism.
Theres also fear that influential executives pursue
their 'pet' (or personal) causes.
Some even ask as to why dont promoters and
executives contribute their own earnings rather than
using what belongs to shareholders.

The ongoing debate (Counterpoint :

Increase CSR Expenditure)

Moving from 'we also make steel' mindset to a 'we

only make steel' mindset
Inspite of financial welfare, social spending has not
increased proportionately.
Shrugged off responsibilities of newly developed
areas of Jamshedpur
Improper treatment of the non-employee
population of Jamshedpur
Lost goodwill shown by unwelcoming attitude in
some villages
Involving NGOs would just be Cheque book charity

QUESTIONS FOR DISCUSSION

How would you answer the IMPM candidate's

question?

First and foremost, alignment to the vision is the

greatest responsibility of a company and Tata Steel
has been doing the same through these initiatives.
The shareholders money is not being wasted, it is
being used to enhance brand equity of Tata. Besides,
such social welfare programs have fetched in cheaper
resources from the locality which otherwise would
have cost way too high, if outsourced. There are a lot
more benefits than those which are explicit.

QUESTIONS FOR DISCUSSION

Is Tata Steel's management justified in

diverting so much of corporate resources
(or shareholders' wealth) towards its selfassumed social responsibilities?

As said in one of the arguments, Tata steel should

spot a few selective areas in the context of social
work. Getting into the shoes of the Government
should not be its motive.

QUESTIONS FOR DISCUSSION

Has Tata Steel's CSR agenda and strategy

become outdated?

The steel industry is rapidly changing and so are the

vulnerabilities faced by it. Tata steel should therefore
make amendments in its CSR agenda to dovetail in to
the new environment. Besides, the overall socioeconomic conditions across the country as well as the
globe are changing rapidly. This should also be taken
into account while considering the obsolescence of its
CSR agenda.

QUESTIONS FOR DISCUSSION

What agenda and strategy would you

recommend for the future?

Tapering down the wide ambit of its social activities

along with aid from specialized NGOs should work as
a better future strategy, as per us.

QUESTIONS FOR DISCUSSION

In view of competitive compulsions dictated by

globalization, should Tata Steel begin to
gradually disengage itself from its traditional
commitment to CSR? Or should it become even
more active than in the past?

It should not disengage from its traditional commitment.

It should rather make amendments with time, so that
most of its stakeholders are satiated.

Thank you