Sucheta Dalal :'Tatas must re-establish contact with Press'
Sucheta Dalal

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'Tatas must re-establish contact with Press'  

August 21, 2002

When does a company feel the need to buy full-page advertisements in leading publications to tell its side of the story, or to complain about a 'campaign of vilification' against it? Either when its communications machinery has collapsed or when it wants to choose the questions it will answer.

And why would India's most respected corporate group need to resort to such advertising? Either out of hubris or bad advice, or both.

The Tata group is bang in the middle of a major controversy and it seems determined to make things worse for itself.

Over the last decade, the Tatas have made headlines over their way of ejecting powerful corporate satraps from the group. It happened with Russi Mody in Tata Steel and with Ajit Kerkar in Indian Hotels. Only the late Darbari Seth was wise enough to exit without public acrimony.

Each time, there were allegations about wrongdoing and threats of litigation, which petered out once the person was removed.

This time again, it is the case of a former blue-eyed boy turned villain (one-time trusted aide of Ratan Tata). Dilip Pendse, former managing director of Tata Finance Ltd, has been accused of running up losses to the tune of nearly Rs 500 crore (Rs 5 billion) through indiscriminate stock market investments, circular transactions and other shady deals.

The Tatas pinned the entire blame for TFL's losses on Pendse and filed several cases against him seeking to recover over Rs 460 crore (Rs 4.60 billion). They also sacked his team and commissioned a special audit through A F Ferguson.

But this time, the media does not seem to be willing to accept that other Tata directors were clueless about TFL's deals. More so, because one director J E Talaulicer is under investigation for insider trading, and some transactions relating to the funding of Telco dealers could not have benefited Pendse.

The issue turned sensational when the A F Ferguson report (which was leaked to the press) did not endorse either the innocence or ignorance of other Tata directors. When this report leaked to the press, two months after it was submitted, the Tatas fuelled the fire by rejecting it.

A F Ferguson added oil to the flames by sacking their senior partner with dark hints about past misdeeds. The partner, Y M Kale, was incidentally a former president of the Institute of Chartered Accountants of India.

Astonishingly, Ferguson actually believed that it could simply return the Rs 9.5 million audit fee and start over again with a new team, without creating a hullabaloo.

As for the Tatas, they unleashed their 'fact v/s fiction' campaign accusing the media of publishing 'deliberately distorted and sensationalised versions' of events, but simultaneously being selective with their facts.

What exactly did they achieve through the campaign? Strictly speaking, they only told the world that they have no friends and needed paid advertisements to get their view across. It also showed irrational distrust.

The last company to have resorted to such a paid advertising campaign was Enron Corporation's controversial Dabhol Power Company. But this was only during its last ditch attempt to salvage its expensive power project in Maharashtra. DPC's campaign was an utter failure, especially when its parent shocked the world soon after and then flamed out.

Documents reveal that Tata directors should either have known about the shady deals or at least questioned them, long before the losses became public. But the Tatas are furious that the media is unwilling to accept their version and dares to question it.

It is worth asking if advertisements are ever an effective counter against negative publicity. International experience shows that it depends on the issue. It works in select cases, like the counter campaign by the anti-tobacco NGOs against cigarette manufacturers in the United States.

It also works as an information tool in outright corporate war or takeover battles. Then both sides need the space to communicate extensively with their respective shareholders or repeat information that does not warrant editorial coverage.

But will an advertisement campaign work when it attacks the media? I can only offer some sane advice I got off the Net telling Israeli press advisors how to counter persistently bad press. It is equally applicable to business houses. It says:

  • Don't start believing that the media is the 'enemy.' This attitude can become a self-fulfilling prophecy. The media can be a valuable ally.
  • Focus on media besides the major networks and newspapers. People get their information from a wide diversity of news sources.
  • When you think of positive stories about Israel, contact the media and urge coverage.
  • When there is negative publicity or bias, respond. Don't assume others will.

Let me add a few tips of my own. The head of a Rs 40,000 crore (Rs 400 billion) business conglomerate cannot afford to be so distrustful about the entire media. And if he is, he should expect people to return the compliment.

Secondly, as an international communications agency says: "Clients can win in court, but lose much more - in terms of reputation - in the court of public opinion." According to it: "The public cares less about whether the company's actions were legal than whether they were fair." And it that respect, the TFL case does raise several issues about governance and fair play.

The Tatas may also have mistimed their advertisements. After all, the legal battle is only about to begin. Also, Dilip Pendse's reply to the Tata plaint has alleged that group Chairman Ratan Tata and senior Tata Sons director N A Soonawala were informed about all his transactions. The Tatas refute these charges - but this only means that more dirt will be washed in public.

Add to that the Department of Company Affairs' action against A F Ferguson - probably the first time ever that the DCA has initiated such action - and it is clear that the story shows no signs of being pushed off the front pages. Also, investigations by the regulators have still to begin and we don't know what they will reveal.

The Tata name indeed has a century of goodwill behind it. And even the most cynical of us hacks would feel sorry to see that cache destroyed, but the Tatas have to work at it too. Sneering at the media and issuing full-page advertisements is not the way to do that.

As litigation communications experts would say - a company under a media onslaught can rarely wait for the truth to win, and it would be much better if it chooses to re-establish its contacts with the press and tries out a more open approach.

-- Sucheta Dalal