The Hindu Business Line : `Corporates must improve quality of life in society'

INDUSTRIAL corporations must have an overarching goal of doing good to the society, of which making profits is only a part. This ensures long-term success, whereas companies with the only goal of making profits do not succeed in the long-term, said Mr B. Muthuraman, Managing Director, Tata Iron and Steel Co Ltd.

Mr Muthuraman, in his talk on `Corporate conscience and wealth generation' here on Monday said the commonly followed method of measuring the success of industrial corporations was wrong.

Most often, the success of companies was measured by their turnover, size, market capitalisation, profit after tax or shareholder value created. The real purpose of industrial corporations is to improve the quality of life in society, he said.

In this talk organised by the Anna University and the Industrial Economist Beyond Books Forum, Mr Muthuraman said everyone had a narrow judgement window and no one appreciated the value of longevity and sustainable success.

He said, the basic philosophy of the Tata group was to improve life in society. A part of the profits made by the group companies is ploughed back to improving the quality of life.

For this to happen, the ownership of companies is important. Tata Sons, the holding company of the group, owns 26 per cent of Tata Steel. Financial institutions and banks hold another 35 per cent. The remaining stake is with 10-12 lakh shareholders.

Tata Sons uses as much as 65 per cent of the dividend it gets from Tata Steel for philanthropic activities, Mr Muthuraman said and added that the owner is a concept of trusteeship.

"We are a company that spends a certain percentage of its profits on society," he said.

Mr Muthuraman said Tata Steel had adopted 700 villages where it did a lot of social work. Tata Steel is still the most profitable steel company besides being the producer of the lowest cost steel.

Highlighting an instance when Tata Steel lost substantial business for deciding to stick to its policy of being honest and ethical, Mr Muthuraman said the power derived from being able to say "no" was unmatched. He told the gathering, which included a number of students, that there is "tremendous amount of power in being honest and ethical."

Mr Muthuraman reminded the audience that life was not a 100-m sprint, but a marathon. Some will be ahead but everyone has to complete the race.