Tata group drafts new rules for royalty & ethics

13 Feb,2014

By Kala Vijayaraghavan & Satish John

 

The $97-billion Tata Group has started work on an overhaul of its Brand Equity and Business Promotion (BEBP) agreement, an omnibus document that governs, among other things, which group companies use the Tata name and how, and also how much royalty they pay for it.

 

The agreement, drafted in 1996 and never revisited since, is now being redrawn to reflect the ‘more universal’ nature of its business as 63% of revenues now accrue from overseas. This includes multibillion dollar businesses Jaguar Land Rover, Corus Group and soda ash maker General Chemicals.

 

“A number of brands in the Tata fold don’t carry the Tata name and, therefore, it is critical that more investors, consumers and stakeholders in international markets are aware of the history and heritage of the group,” said Mukund Rajan, Tata Group’s brand custodian and chief ethics officer, confirming the revamp plan. Asked if this would entail global group companies such as JLR and Corus also paying royalty, Rajan declined comment saying such decisions are yet to be made.

 

Group firms that use the Tata name directly pay a royalty of 0.25% of respective revenues. Companies such as Titan that don’t use the Tata name directly pay less.

 

Streamline use of Tata brand

“We have to streamline the way our companies use the Tata brand,” another official involved in the revamp of the BEBP said. “In the past, we have allowed Tata companies to use the Tata brand and other companies have not. Do we have sufficient clarity in our own minds on how we want to build the brand? It is still work in progress.”

 

Sources say that top group officials feel the international visibility of the Tata brand is not up to the mark.

 

The group will also soon unfurl a major corporate campaign to build awareness among investors, consumers and stakeholders on ‘Brand Tata’ in its major overseas markets.

 

“In some markets, Tata is known as a software company while in some markets as an automobile maker. Our last big brand campaign was done in 2004 and therefore it is critical to ensure that key stakeholders and influencers are aware of our heritage and legacy,” Rajan added. He is also the chairman of the Tata Council for Community Initiatives.

 

The Tata Code of Conduct, a part of the BEBP agreement, is also being reworked to make it more relevant in “certain jurisdictions” outside India. “We have to see whether it is potentially conflicting with local regulatory requirements.

 

We want a code which resonates with regulations in different geographies,” the official added. Tata Sons, the holding company of the group, owns the Tata brand and the Tata trademark registered in India and several other countries. Individual companies have signed the BEBP with Tata Sons.

 

Source:The Economic Times

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