Philanthropy vs industry

THE TATA EXAMPLE GIVES CAPITALISM A CONSCIENCE, BUT A CLOSER LOOK REVEALS POTENTIAL CONFLICTS

- ANAND DESAI

PHILANTHROPY REQUIRES MONEY. The intent of industry is to generate money. Both charitable trusts and business corpo-rates benefit from good governance.On the face of it, they are compatible.

The ideal that industry can be used to generate money for the greater good has stood the test of time, and indeed shone bright in the case of the Tata Group—one of India’s oldest, largest, and most respected business conglomerates that has developed a global reputation across widely diversified businesses.

Tata Trusts are public charitable trusts established to pursue their respective charitable purposes. Their affairs are managed by their trustees who are required to function in accordance with the terms of the trust and exercise the same care as a man of ordinary prudence does when dealing with his own affairs, funds, or property. Tata Trusts own about 66% of the equity of Tata Sons Private Limited. The extensive charitable work undertaken by Tata Trusts is mainly financed by the dividend income received from Tata Sons (~1,615 crore in FY25 when Tata Sons posted a profit of ~26,232 crore).

The Tata Group encompasses more than 300 companies including listed entities engaged in sectors ranging from engineering to consultancy to hospitality—all underthe umbrella of Tata Sons. Each of these entities are profit-driven and professionally managed.

The association between Tata Trusts and Tata Sons does not end with this monetary contribution.Tata Trusts, collectively being the majority shareholders, have considerable control over the affairs of Tata Sons. And this is where trouble can brew, as shown by recent events, because such control, inevitably, raises questions about governance and conflict of interest.