Case | HBS Case Collection | 2011 (Revised from original 2010 version)

Leadership in Corporate Reporting Policy at Tata Steel

by Karthik Ramanna and Rachna Tahilyani

Abstract

The case describes the challenges faced by Tata Steel, India's largest private sector steel company, as it transitions from Indian GAAP to IFRS. It first describes those challenges in the context of the institutional voids that make IFRS adoption difficult in India. The case then focuses on how companies in emerging markets might represent their interests at the IASB, the standard setting body for IFRS.

Keywords: Financial Reporting; International Accounting; Multinational Firms and Management; Policy; Leadership; Emerging Markets; Standards; Organizational Change and Adaptation; Steel Industry; India;

Format: Print

22 pages

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Citation:

Ramanna, Karthik, and Rachna Tahilyani. "Leadership in Corporate Reporting Policy at Tata Steel." Harvard Business School Case 111-028, May 2011. (Revised from original September 2010 version.)

This paper provides an accounting-based conceptual framing of the phenomenon of corporate accountability reporting. Such reporting is seen as arising from a delegator's (e.g., a citizenry) demand to hold a delegate (e.g., shareholders) to account. When effective, corporate accountability reporting can internalize certain externalities into firms' resource-allocation decisions, although doing so will not always serve shareholders' interests. I leverage the positive accounting literature's current understanding of properties of financial reports to develop three hypotheses on corporate accountability reporting. I argue that an accountability reporting system is likely to be more useful to a delegator if it (1) mitigates information advantages across delegates and delegators, (2) reports both stocks and flows in the measures of account, and (3) has a mutually agreeable due process to match across periods the actions of delegates and the outcomes of those actions. I show how the successive incidence of these properties in observed corporate accountability reports can be used to determine whether and how those reports create or destroy value for shareholders and other constituencies.

Explores the decision faced by AIG's board on whether to join shareholder and ex-CEO Maurice Greenberg’s lawsuit against the U.S. government. The suit, argued by super-lawyer David Boies (of Bush v. Gore and California Gay Marriage fame), claims that in September 2008 the U.S. arbitrarily set aside the rights of AIG's shareholders—violating the Fifth Amendment by taking private property without just compensation—while preserving shareholder rights in other troubled financial institutions, including Goldman Sachs whose ex-CEO was the then Treasury Secretary. The U.S. government moved to dismiss the case arguing that it has wide discretion in times of crisis, but a federal judge allowed the suit to proceed. The case raises two issues central to understanding capitalism: (1) the importance of and limits to property rights; and (2) the role of the state in choosing between varieties of capitalism, here between oligarchic and entrepreneurial capitalism.

Explores the decision faced by AIG's board on whether to join shareholder and ex-CEO Maurice Greenberg's lawsuit against the U.S. government. The suit, argued by super-lawyer David Boies (of Bush v. Gore and California Gay Marriage fame), claims that in September 2008 the U.S. arbitrarily set aside the rights of AIG’s shareholders—violating the Fifth Amendment by taking private property without just compensation—while preserving shareholder rights in other troubled financial institutions, including Goldman Sachs whose ex-CEO was the then Treasury Secretary. The U.S. government moved to dismiss the case arguing that it has wide discretion in times of crisis, but a federal judge allowed the suit to proceed. The case raises two issues central to understanding capitalism: (1) the importance of and limits to property rights; and (2) the role of the state in choosing between varieties of capitalism, here between oligarchic and entrepreneurial capitalism.

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