Growth will match or exceed 8.5-9% projected in 2010; the EU will hold together despite crises, so we need not fear disruption of financial flows; inflation rate will stay high, perhaps 7-8%; the UPA government will survive and very little of the mud flung at it on account of 2 G sales will stick.
More in ET column, What lies in store for India in 2011?
Thursday, January 13, 2011
Thursday, December 23, 2010
Three golden jubilees
Three well-known institutions, IIMA, IIMC and The Economic Times are currently celebrating their golden jubilees. I happen to have been a bit player in all three. I record my impressions of these institutions in my ET column, A tale of three jubilees.
Monday, December 13, 2010
Great Lakes stake sale
Bala Balachandran, founder of Great Lakes School of Management, is in talks to sell 51% of his stake to Tata Foundation and Pirosha Godrej Foundation, BS reports.
Is the original promoter in an educational institution allowed to exit this way, possibly at a profit? I would like to know. The BS report states:
“I have 90 per cent stake in my institute. I have decided to give the ownership to somebody who can give me some money to expand. I may offload as much as 51 per cent. The valuation of the institute would be around Rs 220 crore,” Balachandran told Business Standard on the sidelines of an event in Mumbai.Balachandran would make a cool over Rs 110 crore on his stake sale. Not bad for an investor in a school that has been around for less than 10 years. What was his original investment, I wonder. The money that Balachandran makes would go into his pocket because it arises from sale of his equity, not through additional issue of equity. Presumably, for the expansion, the new investors will provide the additional funding.
Is the original promoter in an educational institution allowed to exit this way, possibly at a profit? I would like to know. The BS report states:
Great Lakes was formed in 2002 as a Section-25 company. Section-25 companies are those formed for the purpose of promoting commerce, art, science, religion, charity or any other deemed “useful object” and whose profits are used solely to further its stated objectives.Balachandran will be taking over the Mumbai Business School, which will be named Great Lakes, Mumbai. Great Lakes is also venturing into Gurgaon and Orissa. In Gurgaon, it has bought land. In Orissa, the government has given it 100 acres of land on a 99 year lease. I have said this before: we need to review the policy on making government land available to private parties at less than market prices.
Thursday, December 09, 2010
Making a career out of board memberships
An article in the latest HBR proposes a solution today's corporate governance problems: have professional boards. That is, board memberships become something of a career. No professional director will serve on more than two boards. He will be required to spend time at the company other than for board meetings. He will have to be knowledgeable about the sector or products in which the company operates. And, of course, he will be paid more for his exertions.
I doubt that this will work. No matter how knowledgeable about a sector or how much time you spend on it, you can never become as knowledgeable as management. They can always withhold information or pass on information in ways that suit them.
Boards are ineffective not because of lack of knowledge or ability but because independent directors don't have it in them to question and challenge management. It is more rewarding to go along with management than to do otherwise. Remember, directors are beholden to management for giving them lucrative directorships. You can hope to get independence only when other interest groups find a place on the board- institutional investors, employees, minority shareholders.
More in ET column, Board membership as career?
I doubt that this will work. No matter how knowledgeable about a sector or how much time you spend on it, you can never become as knowledgeable as management. They can always withhold information or pass on information in ways that suit them.
Boards are ineffective not because of lack of knowledge or ability but because independent directors don't have it in them to question and challenge management. It is more rewarding to go along with management than to do otherwise. Remember, directors are beholden to management for giving them lucrative directorships. You can hope to get independence only when other interest groups find a place on the board- institutional investors, employees, minority shareholders.
More in ET column, Board membership as career?
Guru of microfinance under fire
Mohammed Yunus, the Nobel prize winning founder of Grameen Bank and originator of the idea of microfinance, is facing an investigation over alleged diversion of funds given by a European donor from the Bank to an affiliated organisation. He has now come under fire from his PM, Sheikh Hasina Wajed, FT reports.
Wajed is quoted as saying, "Micro-lenders make the people of this country their guinea pig ... They are sucking blood from the poor in the name of poverty alleviation.”
More ammunition for critics of microfinance in this country. Don't expect anything to move until the RBI's Malegam committee submits its report, expected in mid-January.
Wajed is quoted as saying, "Micro-lenders make the people of this country their guinea pig ... They are sucking blood from the poor in the name of poverty alleviation.”
More ammunition for critics of microfinance in this country. Don't expect anything to move until the RBI's Malegam committee submits its report, expected in mid-January.
Friday, December 03, 2010
Does corporate governance matter?
It is assumed that corporate governance defines the health and performance of a company. How true is this? In the Economist, Schumpeter cites a recent study that casts doubt on this view;
to better performance. So, maybe, one cannot generalise from banks?
Well, a good way to address the question of whether corporate governance matters is to ask whether management will do without boards at all? Is this desirable? Most people would think not. Some checks, however imperfect, are better than none.
Secondly, we have to look closely into the role and motivation of independent directors. In most cases,' independent' directors are selected by management. Management also pays them well in some cases. It's hard to see these directors taking their role seriously and challenging management. We need to find a different way to select independent directors. Even then, they may be co-opted by management. But it's worth trying something different.
The authors conducted a comprehensive study of the performance in 2007-08 of 296 financial institutions with assets of more than $10 billion. They found that none of the tenets of good corporate governance stood up to close examination. Directors who were well informed about finance performed no better than know-nothings. Companies that separated CEOs and chairmen did no better. Far from helping companies to weather the crisis, powerful institutional shareholders and independent directors did worse in terms of shareholder value. Indeed, the proportion of independent directors on the boards was inversely related to companies’ stock returns.The authors of the study are quick to also point out that in East Asia, external monitoring has led
to better performance. So, maybe, one cannot generalise from banks?
Well, a good way to address the question of whether corporate governance matters is to ask whether management will do without boards at all? Is this desirable? Most people would think not. Some checks, however imperfect, are better than none.
Secondly, we have to look closely into the role and motivation of independent directors. In most cases,' independent' directors are selected by management. Management also pays them well in some cases. It's hard to see these directors taking their role seriously and challenging management. We need to find a different way to select independent directors. Even then, they may be co-opted by management. But it's worth trying something different.
Friday, November 26, 2010
When Ireland rocks the world
Ireland, which accounts for 0.3% of the world GDP, has been sending shock waves through the world economy. Earlier, it was Ireland and Greece. How do contain disruptions of this sort emanating from relatively small economies? I touch upon this in my ET column, Small economies, big headaches.
Tuesday, November 23, 2010
Ratan Tata is angry
About a week ago, I may have been forgiven for getting the impression that the Tatas could not start an airline some years ago because they didn't want to bribe the minister concerned. That is the impression I got from newspaper headlines.
I now learn that it wasn't anything like that. A businessman told Tata that he would be stupid to pass up an chance to start an airline just because it meant paying some minister R 15 crore. Here are the details that I came across at a site on the Internet (and I hope they have reproduced Tata's clarification correctly):
Which raises the question: how did so many papers report the news inaccurately?
I now learn that it wasn't anything like that. A businessman told Tata that he would be stupid to pass up an chance to start an airline just because it meant paying some minister R 15 crore. Here are the details that I came across at a site on the Internet (and I hope they have reproduced Tata's clarification correctly):
Business Standard wrote an edit saying that instead of 'whining' about the issue, Tata should name and shame the minister. Tata has written an angry letter to the paper roughly making the same points as above.I ( Ratan Tata) happened to be on a flight once, a fellow industrialist sitting on a seat next to me & he said you know I don’t understand, you people are very stupid. You know that the minister wants 15 crore of rupees, why don’t you just pay, you want the airlines. I said you will never understand this; I just want to go to bed at night knowing that I haven’t got the airline by paying for it.”
The company then included a clarification on the following three points, which India Real Time is reproducing verbatim:
–No minister ever asked Mr. Tata for a bribe
–The fellow industrialist expressed his personal view point that some minister (sic) were asking for a bribe
–Mr. Tata in no way was in agreement to the fact that he was asked for bribe by any minister
Which raises the question: how did so many papers report the news inaccurately?
Thursday, November 18, 2010
Vedanta university - and land grabs of private colleges
The Vedanta group's ambitious plans for a world-class university has suffered a huge setback - and perhaps won't happen now- with the Orissa High Court's adverse ruling in the case related to acquisition of land for the project. FT reports:
BS notes that a good engineering institute can be set up on 10 acres and a management institute on 5. So why are private institutions asking for and getting so much land? It also notes that Infosys' Mysore training facility is on a 337 acre campus. This is not even a degree-granting facility, it is strictly for a private company. Interestingly, Shiv Nadar and Aziz Premji are acquiring and pay for the land they need for their educational ventures instead of seeking concessional land from the government.
The Orissa High Court has ruled that the Orissa government’s acquisition of about 6,500 acres of land – including 500 acres from Puri’s famous Jagannath temple – and the land’s subsequent transfer to Mr Agarwal’s eponymous foundation to build Vedanta University was illegal.
The ruling has brought to the fore the question of land being acquired for setting up of private universities and colleges. BS has an interesting feature on the subject today. The article notes that the Anil Ambani group has recently been alloted 110 acres by the MP government for its foray into education while ISB got 70 acres of land in Mohali. The land allotment is disproportionate to the requirement in many cases. Where it is made over to private parties, the suspicion of a land grab is bound to be there.
BS notes that a good engineering institute can be set up on 10 acres and a management institute on 5. So why are private institutions asking for and getting so much land? It also notes that Infosys' Mysore training facility is on a 337 acre campus. This is not even a degree-granting facility, it is strictly for a private company. Interestingly, Shiv Nadar and Aziz Premji are acquiring and pay for the land they need for their educational ventures instead of seeking concessional land from the government.
Thursday, November 11, 2010
Microfinance myths
Now that recoveries of microfinance institutions in AP have virtually ground to a halt, what happens to bank exposure to MFIs of some Rs 27,000 crore? I am surprised that the question has not been posed thus far. Under the agreement between the financial services secretary and MFIs, not only MFIs cap their interest rate at 24%, they will now only have monthly repayment with repayments to be made at an approved panchayat council office. The slightest hint of harassment means the recovery agent could end up in jail.
What sort of recovery is possible in these conditions? Certainly not the 100% claimed by MFIs thus far. I would be very surprised if banks did not end up taking a substantial hit. This should prompt some introspection among banks. How did they fall over each other to lend to entitities that were mostly one-person affairs and whose governance left much to be desired? Did they keep track of cumulative bank exposure to a given MFI?
On a broader note, the MFI model itself will have to be revisited. MFIs should now be brought under stringent regulation, of course, but also on-lending of bank funds through MFIs cannot continue as before. Let MFIs garner their own funds either as equity or as deposits (with deposits being linked to net worth). More on this in my ET column, Five myths about microfinance.
What sort of recovery is possible in these conditions? Certainly not the 100% claimed by MFIs thus far. I would be very surprised if banks did not end up taking a substantial hit. This should prompt some introspection among banks. How did they fall over each other to lend to entitities that were mostly one-person affairs and whose governance left much to be desired? Did they keep track of cumulative bank exposure to a given MFI?
On a broader note, the MFI model itself will have to be revisited. MFIs should now be brought under stringent regulation, of course, but also on-lending of bank funds through MFIs cannot continue as before. Let MFIs garner their own funds either as equity or as deposits (with deposits being linked to net worth). More on this in my ET column, Five myths about microfinance.
Tuesday, November 02, 2010
G 20: putting the pressure on China won't help
The US seems to believe that a revaluation of the yuan holds the key to global imbalances. Of course, the Chinese need to revalue. But they will be more willing to do so when the see the US economy picking up smartly and continuing to generate demand for their exports. That means US has to pep up domestic demand. It's fast becoming apparent that monetary policy alone won't do the trick for the US.
Quantitative easing-II has led to funds flooding into emerging markets and triggering competitive devaluations. It hasn't done much to revive the US economy. Fiscal policy, discredited since the Greek crisis, may have to play its role. More in my ET column, G 20 accord needs US policy shift.
Quantitative easing-II has led to funds flooding into emerging markets and triggering competitive devaluations. It hasn't done much to revive the US economy. Fiscal policy, discredited since the Greek crisis, may have to play its role. More in my ET column, G 20 accord needs US policy shift.
Wednesday, October 27, 2010
Financing higher education
Government universities cannot afford to continue large subsidies to students. They have to raise fees. This is true not just for India but for other countries as well. How to increase fees without undermining accountability? In today's ET, Arvind Panagriya cites the recommendations of a panel on higher education in the UK.
The panel suggests that students not be asked to pay fees upfront. The government should foot the expenditure of 6000 pounds per student. Students should start repaying the fees to the government once their income crosses a certain threshold- say, 21,000 pounds.
I don't know whether such a scheme is enforceable. It means keeping tabs on every graduating student and the income he or she is earning after graduation. But the underlying principle is interesting. The panel has not asked that students simply finance their education costs through loans. It apparently sees education loans as impeding access. It is one thing to repay fees as and when able. It is another to be committed to huge outflows at the point of graduation.
The panel's approach is in refreshing contrast to the approach in India where education loans are seen as the answer to rising fees especially in the professional courses. The IIMs, for instance, have taken this line to justify huge increases in fee in recent years. As HRD minister, Murli Manohar Joshi had opposed high fees at IIMs and other places during the tenure precisely on the ground that it would impede access.
The problem with the IIMs' increasing their fees is that it has led to an across the board increase in fee in business management course. While IIM graduates may be able to repay their loans, students at other b-schools are finding the going rough. Commercialisation of education comes in the way of inclusion. The answer to universities' or schools' need for higher fees has to be some combination of government subsidy, private endownment and loans or, if feasible, pay-as you- earn schemes.
The panel suggests that students not be asked to pay fees upfront. The government should foot the expenditure of 6000 pounds per student. Students should start repaying the fees to the government once their income crosses a certain threshold- say, 21,000 pounds.
I don't know whether such a scheme is enforceable. It means keeping tabs on every graduating student and the income he or she is earning after graduation. But the underlying principle is interesting. The panel has not asked that students simply finance their education costs through loans. It apparently sees education loans as impeding access. It is one thing to repay fees as and when able. It is another to be committed to huge outflows at the point of graduation.
The panel's approach is in refreshing contrast to the approach in India where education loans are seen as the answer to rising fees especially in the professional courses. The IIMs, for instance, have taken this line to justify huge increases in fee in recent years. As HRD minister, Murli Manohar Joshi had opposed high fees at IIMs and other places during the tenure precisely on the ground that it would impede access.
The problem with the IIMs' increasing their fees is that it has led to an across the board increase in fee in business management course. While IIM graduates may be able to repay their loans, students at other b-schools are finding the going rough. Commercialisation of education comes in the way of inclusion. The answer to universities' or schools' need for higher fees has to be some combination of government subsidy, private endownment and loans or, if feasible, pay-as you- earn schemes.
Monday, October 25, 2010
Backdoor privatisation of IIMs?
The report of the second Bhargava committee on governance at the IIMs was made available to the government a few weeks ago. It was discussed at a meeting that Kapil Sibal had with IIM directors recently. (The first Bhargava committee report came out in 2008 and was shelved following objections from the IIM establishment).
I read the report with some dismay. Let me just react to one or two proposals for now. The committee wants the ownership of the IIMs to vest with the Society in which ownership is nominally vested today. It suggests that corporate entities be allowed to become members at a price of Rs 20 crore. For individuals, the price could be Rs 5 crore; for alumni Rs 3 crore. These numbers may be lowered if the IIMs think that is necessary.
What does this mean? That any businessman and his family are associates can garner three or four memberships of the Society for Rs 20 crore or so? Or that any industrial group can pick up two or three seats for Rs 60 crore? And then proceed to call the shots? This strikes me as backdoor privatisation of the IIMs. The worst part of it is that businessmen or affluent individuals would be able to run the IIMs without having to invest a great deal.
At the same time, the committee wants the government to continue to meet capital expenditure for the older IIMs, revenue expenditure as well of the newer IIMs and make contributions towards pension liabilities at the IIMs. Call it PPP if you like- a public private partnership in which the government bears the costs, the private sector calls the shots. It is astonishing that three IIM directors should have been party to this proposal. (The fifth member was an alumnus of IIM-B).
The report says somewhere that ownership should vest in the Society, not in the faculty. That will be news to faculty at least at IIMA where the concept of a 'faculty-governed institute' is sacrosanct and ownership or decision-making is divided amongst the Board, faculty and government.
I read the report with some dismay. Let me just react to one or two proposals for now. The committee wants the ownership of the IIMs to vest with the Society in which ownership is nominally vested today. It suggests that corporate entities be allowed to become members at a price of Rs 20 crore. For individuals, the price could be Rs 5 crore; for alumni Rs 3 crore. These numbers may be lowered if the IIMs think that is necessary.
What does this mean? That any businessman and his family are associates can garner three or four memberships of the Society for Rs 20 crore or so? Or that any industrial group can pick up two or three seats for Rs 60 crore? And then proceed to call the shots? This strikes me as backdoor privatisation of the IIMs. The worst part of it is that businessmen or affluent individuals would be able to run the IIMs without having to invest a great deal.
At the same time, the committee wants the government to continue to meet capital expenditure for the older IIMs, revenue expenditure as well of the newer IIMs and make contributions towards pension liabilities at the IIMs. Call it PPP if you like- a public private partnership in which the government bears the costs, the private sector calls the shots. It is astonishing that three IIM directors should have been party to this proposal. (The fifth member was an alumnus of IIM-B).
The report says somewhere that ownership should vest in the Society, not in the faculty. That will be news to faculty at least at IIMA where the concept of a 'faculty-governed institute' is sacrosanct and ownership or decision-making is divided amongst the Board, faculty and government.
Monday, October 18, 2010
Microfinance bubble burst?
Many have been warning that the runaway growth in microfinance assets is not sustainable. is the bubble about to burst? Well, the AP government's ordinance is certainly ominous as it requires microfinance institutions to suspend collections until they have registered with local authorities. (see FT report). Banks cannot escape the fall-out as they as the primary funders of MFIs mainly in order to meet priority sector obligations.
A number of practices of MFIs are now coming to light: multiple lending, aggressive marketing of loans to the unwary (much like the sale of credit cards and consumer loans done by foreign and private banks), dubious HR practices (hiring 18 year olds and not issuing any appointment letters), weekly repayments, harsh recovery methods, forming liability groups out of self-help groups created by NABARD and other government agencies.
Some of the arguments for high interest rates charged by MFIs are downright absurd. Eg. The interest rate of 30% if ok as money-lenders charge over 100%. Says who? Besides, money-lenders don't market their loans. They make loans to people who come to them- and strictly against collateral.
It has taken the SKS IPO and a spurt in suicides in AP for people to wake up to what's going on. One thing is certain: microfinance will not be the same again.
A number of practices of MFIs are now coming to light: multiple lending, aggressive marketing of loans to the unwary (much like the sale of credit cards and consumer loans done by foreign and private banks), dubious HR practices (hiring 18 year olds and not issuing any appointment letters), weekly repayments, harsh recovery methods, forming liability groups out of self-help groups created by NABARD and other government agencies.
Some of the arguments for high interest rates charged by MFIs are downright absurd. Eg. The interest rate of 30% if ok as money-lenders charge over 100%. Says who? Besides, money-lenders don't market their loans. They make loans to people who come to them- and strictly against collateral.
It has taken the SKS IPO and a spurt in suicides in AP for people to wake up to what's going on. One thing is certain: microfinance will not be the same again.
Rumblings in NIT system
Directors of two NITs, Warangal and Trichy, have been suspended following various charges against them, IE reported a while ago. The ministry of HRD has sought the approval of the President for the dismissal of the chairman of the board of NIT, Kurukshetra. Apparently in a sign that it is not happy with the state of affairs of NITs, the ministry has commenced the search for various NIT directors a full year before the completion of tenures of the present ones.
I can't comment on the specific cases above. But if the system is acting at all, it is a good sign. One of the sorriest things about our elite institutions is the complete lack of accountability of directors and the boards. If people are being called to account, that is a healthy sign. I also approve of the search process commencing well in advance. Typically, the search starts so late that the incumbent hangs of for several months after his tenure.
Here's a suggestion towards ensuring accountability of directors: there should be a mid-term appraisal of all directors. The appraisal should document what has been accomplished during the director's tenure up to that point and what is proposed to be accomplished in the remaining period of his tenure. This appraisal should be placed in the public domain by being posted at the Institute's website.
I can't comment on the specific cases above. But if the system is acting at all, it is a good sign. One of the sorriest things about our elite institutions is the complete lack of accountability of directors and the boards. If people are being called to account, that is a healthy sign. I also approve of the search process commencing well in advance. Typically, the search starts so late that the incumbent hangs of for several months after his tenure.
Here's a suggestion towards ensuring accountability of directors: there should be a mid-term appraisal of all directors. The appraisal should document what has been accomplished during the director's tenure up to that point and what is proposed to be accomplished in the remaining period of his tenure. This appraisal should be placed in the public domain by being posted at the Institute's website.
Thursday, October 14, 2010
US bail out cost less than 0.5% of GDP!
The US government faced fire for its $700 bn rescue of the financial sector in 2008 which was called Tarp. Surprise, surprise. The final cost is now estimated at less than $50 bn. My latest ET column explains how.
The losses in the financial sector across the world too were exaggerated by estimates made in a time of panic. Financial institutions hold mark to market securities whose prices are heavily depressed in times of panic. No point in estimating losses at these prices and the costs of a rescue. Governments will be frozen when they see the numbers. Just go out and save the large banks. Markets will bounce back and the costs will be far less than thought earlier. That's the lesson from the Tarp experience.
The losses in the financial sector across the world too were exaggerated by estimates made in a time of panic. Financial institutions hold mark to market securities whose prices are heavily depressed in times of panic. No point in estimating losses at these prices and the costs of a rescue. Governments will be frozen when they see the numbers. Just go out and save the large banks. Markets will bounce back and the costs will be far less than thought earlier. That's the lesson from the Tarp experience.
Thursday, September 30, 2010
Khandelwal report on HR in banks
The report on HR in banks, prepared by a committee headed by A K Khandelwal, former Chairman of Bank of Baroda, came out in June. It wasn't made public. I happened to get a copy of it last week. I am concerned about the focus on variable pay in the report. As I argue in my ET column, HRD in banks is more than just pay, I have serious concerns about whether such schemes can work in the public sector.
There is much talk about the public sector losing talent because of poor pay relative to the private sector. The IAS wanted a huge job in salary to make jobs comparable to the private sector. The army, as I recall, wanted the Chief of staff, to paid Rs 1 crore. IIT faculty agitated for pay superior to what the Pay Commission wanted. The IIMs grumble about pay. And, of course, all PSUs would like pay to be benchmarked to the private sector.
In many ways, pay in academics is a lot better than it has ever been before - and there is no indication that it is drawing in superior talent. Nor are there signs of the opposite kind, that the talent coming into IAS, for example, is poorer than in the past. Senior IAS officers have told me that the composition of probationary officers is changing- more come from lower middle class and rural families and they may lack polish but they are very bright and committted. Competition for the administrative services remains fierce- as fierce as that for IITs and IIMs.
So, we should not make the mistake of seeking parity in pay across the public and private sectors. The two offer different career choices and different lifestyles. This goes for public sector banks as well. They need to improve pay but not catch up with private sector either in what they pay or how they pay (fixed pay or variable pay).
There is much talk about the public sector losing talent because of poor pay relative to the private sector. The IAS wanted a huge job in salary to make jobs comparable to the private sector. The army, as I recall, wanted the Chief of staff, to paid Rs 1 crore. IIT faculty agitated for pay superior to what the Pay Commission wanted. The IIMs grumble about pay. And, of course, all PSUs would like pay to be benchmarked to the private sector.
In many ways, pay in academics is a lot better than it has ever been before - and there is no indication that it is drawing in superior talent. Nor are there signs of the opposite kind, that the talent coming into IAS, for example, is poorer than in the past. Senior IAS officers have told me that the composition of probationary officers is changing- more come from lower middle class and rural families and they may lack polish but they are very bright and committted. Competition for the administrative services remains fierce- as fierce as that for IITs and IIMs.
So, we should not make the mistake of seeking parity in pay across the public and private sectors. The two offer different career choices and different lifestyles. This goes for public sector banks as well. They need to improve pay but not catch up with private sector either in what they pay or how they pay (fixed pay or variable pay).
Thursday, September 16, 2010
Limit IIT directors to one term
I wrote in my last post about the increase in the retirement age of IIT directors from 65 to 70. I said I did not favour the idea. Some people wrote in saying that they would like to see cogent reasoning for my position, apart from the fact that youth is to be preferred.
Well, the main reason is that in our institutions of higher education, we do not have a system of accountability for the director. So, we lack a proper basis for extending the director beyond 65 or giving him a second or third term. The decision would become subject to the whims of government or the Board.
The IIMs have long had a convention of a single term for the director and this has served them well. It was convention put in place by IIMA's legendary Ravi Matthai. I elaborate on this in my ET column, Let IIT directors retire at 65.
Well, the main reason is that in our institutions of higher education, we do not have a system of accountability for the director. So, we lack a proper basis for extending the director beyond 65 or giving him a second or third term. The decision would become subject to the whims of government or the Board.
The IIMs have long had a convention of a single term for the director and this has served them well. It was convention put in place by IIMA's legendary Ravi Matthai. I elaborate on this in my ET column, Let IIT directors retire at 65.
Friday, September 10, 2010
IITs allowed to raised retirement age to 70
The ministry of HRD has allowed the IITs to raise the retirement age for faculty to 70, according to the Hindustan Times. The retirement age of IIT directors can also be raised to 70, which would allow several directors to stay on for a second term. This is a bad idea.
Letting IIT directors stay on for until 70 is bad not just for the reason mentioned in the report, namely , that it will render IIT directors vulnerable to outside pressures. We need younger people at the top, not older ones. And, believe me, there is plenty of talent in the IIT system and outside the country that can be tapped.
Ditto with faculty. Since extensions will, in effect, be at the discretion of the director, this will render faculty totally subservient to the director. It is also not good for faculty to hang around an IIT or IIM for too long- not good for them, not good for the institution. Even as it is, faculty stay on for 30-35 years. I shudder to think of having faculty around for, say, 45 years. Faculty must be extended beyond 65, if at all, provided they have not spent more than 25 years at the institution.
I sincerely hope this does not get extended to the IIMs. The IIMs, by and large, have followed the principle of a single term for the director although, regrettably, this healthy principle was not followed in the recent past in the case of the directors of IIM Calcutta and IIM Lucknow. There is very little accountability among IIT and IIM directors and allowing them to reign for 10 years risks causing serious damage.
Letting IIT directors stay on for until 70 is bad not just for the reason mentioned in the report, namely , that it will render IIT directors vulnerable to outside pressures. We need younger people at the top, not older ones. And, believe me, there is plenty of talent in the IIT system and outside the country that can be tapped.
Ditto with faculty. Since extensions will, in effect, be at the discretion of the director, this will render faculty totally subservient to the director. It is also not good for faculty to hang around an IIT or IIM for too long- not good for them, not good for the institution. Even as it is, faculty stay on for 30-35 years. I shudder to think of having faculty around for, say, 45 years. Faculty must be extended beyond 65, if at all, provided they have not spent more than 25 years at the institution.
I sincerely hope this does not get extended to the IIMs. The IIMs, by and large, have followed the principle of a single term for the director although, regrettably, this healthy principle was not followed in the recent past in the case of the directors of IIM Calcutta and IIM Lucknow. There is very little accountability among IIT and IIM directors and allowing them to reign for 10 years risks causing serious damage.
Thursday, September 02, 2010
Basle 3 doesn't look promising
The BIS will soon unveil proposals for bank capital under Basel 3. From what has been revealed so far, these won't be tough enough on banks. The new capital requirements will be phased in over a longish period. Regulators are worried that tougher requirements will impact on the weak global recovery but this is not supported by BIS research on the impact of additional capital.
I'm afraid it doesn't look as though policy-makers are serious about preventing recurring banking crises. Maybe they just want to shrug these off as part of the ups and downs of capitalist economies?
More in my ET column, Banks, relax- until the next crisis.
I'm afraid it doesn't look as though policy-makers are serious about preventing recurring banking crises. Maybe they just want to shrug these off as part of the ups and downs of capitalist economies?
More in my ET column, Banks, relax- until the next crisis.
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