Business Ethics in India

In countries where institutional and public champions promoting corporate responsibility are weak, companies tend to have a narrow approach to business ethics. Such a narrow approach to corporate responsibility can take several forms, but in essence boils down to a limited response to the concerns of communities where a company operates.

India, where corporate responsibility has become an over-used catchphrase, some close scrutiny, however, throws-up a somewhat unique situation. A good illustration of this is the article I recently read which talks about the recent crisis faced by Tata Motors, a major part of the Tata Group.

It is indeed ironic that on 2 December 2006, while Ratan Tata, chairman of the Tata Group, was being honoured for “Responsible Capitalism” by the Princess Royal in London, in an obscure Singur neighbourhood in the Indian state of West Bengal, thousands of farmers and labourers were being attacked by armed police. Newspaper reports said that at least 80 people, including women and children, were injured. The Singur farmers were protesting against the forced acquisition of their lands by the government so that Tata’s latest dream project – a plant to build India’s “one lakh car” (100,000 rupees or just over $2000) – could become a reality. Tata had decided to locate their small-car plant at Singur, about 40 kilometres north of Kolkata, and wanted to get hold of about 500 hectares of land. The plan is for the cars to be in full production by 2008. For the Left Front chief minister of West Bengal, securing this project has been an issue of prestige, especially considering the competition from several other industry-friendly Indian states. More than 5,000 families in 11 villages had been evicted. The news reports suggested only 1,600 farmers agreed to sell their land. Tata, however, has chosen to maintain a silence on the matter, leaving the government with a deadline to complete the acquisition and handover the land, and ignoring petitions by campaigning organisations.

Tata has cultivated, and now enjoys, an outstanding image in India, and beyond, of being a very socially responsible group. Many companies in India perceive Tata’s corporate responsibility as a benchmark to emulate. With the number of awards and recognitions that different companies in the group receive every year, one may be tempted to believe that many broad approaches to corporate responsibility would be evident in the company’s actions. However, as the Singur case demonstrates, Tata Motors seems to be caught up in a narrow approach, where social responsibility begins only after the land is handed over and the plant is commissioned. So, this case raises a number of issues. When and where does the responsibility of companies begin and end? Does over-reliance on community development make a company responsible? It is high time companies in countries like India start reflecting upon their corporate practices and look beyond traditional community development and a simple focus on compliance.