Friday, March 25, 2011

Privatisation of IIMs?

I had flagged this issue in an earlier post. Today, P K Sett of IIM Calcutta comments on the proposed changes in the governance structure of the IIMs. One proposal, made by a committee constituted by the HRD ministry, is for IIMs to sell seats in their Societies for Rs 20 crore (corporate) and Rs 5 crore (individual). This is intended to create 'ownership' in the IIMs. Sett rightly points out that this would mean a fundamental change in the character of the IIMs. I have two observations to make.

First, it's not clear yet that the ministry favours this proposal. Indeed, at a meeting between the minister and the IIM directors, it appears that the ministry had reservations about it. Two, it's not correct to blame the minister for this proposal or another proposal that would have faculty plans approved by the Board of Governors.

Both the proposals have emanated from committees on which the IIMs were represented. The Bhargava committee, which came up with the obtuse suggestion to sell seats to private donors, had the directors of IIM Bangalore, Calcutta (Sett's own boss) and Kozhikode as members. The Balakrishnan committee, which wanted the Board to approve faculty plans, had the director of IIMA as a member. All IIM directors were present at the meeting last October with the minister where the two reports were discussed.

Sett writes,'The public at large only has to stand and watch the demise of a great icon of modern India - if the HRD minister has his way.' Well, if the proposals go through, you can't blame the minister for that- the IIM directors are very much party to it. Why is it that we always end up making the government out to be the villain?

Monday, March 21, 2011

Arab revolt

When George Bush first talk of promoting democracy in the Arab world, it seemed like another neo-con justification for intervention, as hypocritical as talk of "human rights" in the erstwhile communist countries. But, after reading Bush's memoirs and seeing the tumult in the Arab world, I am having to change my views. It does appear that the basic conviction underlying Bush's decision to intervene in Afghanistan and Iraq is being borne out, namely, that only the creation of democracies in the region would be in America's long-term interest. More on this in my ET column.

It is interesting that Obama has intervened decisively in favour of popular sentiment in both Tunisia and Egypt and so has Western Europe. I am not very sure of the situation developing in Libya, though, whether it reflects majority sentiment or a minority revolt that the west wants to shore up for its own reasons.

Bush's memoirs reveal a president more thoughtful than made out to be in the media, a man capable of thinking for himself and willing, on more than one occasion, to overrule his advisors. His questioning of his military advisors is interesting. In various situations, he does not get into the details of military planning but asks questions that a leader should and that military men don't necessarily worry about.

The book ends with Bush walking his dog around near his home and having to clean up after him- not what you would expect the typical hot-shot politician in India to do.

Saturday, March 12, 2011

Deutsche Bank succession

BS ran an interesting Reuters story yesterday on Deutsche Bank planning for a future without its rainmaker, Anshu Jain. I must say that my respect for the institution went up enormously after I read the story.

Anshu Jain heads the investment banking division which accounts for 70-80% of the bank's profit in recent years. But the supervisory board is inclined to believe, so the story goes, that Jain is not the right person to succeed Josef Ackermann as CEO because the bank needs to cut back its dependence on investment banking and invest more in stable businesses such as retail banking and wealth management. That's a brave decision to take, even if justified by the experience in the recent crisis.

The board is also not in favour of Jain because it believes that the next CEO must enjoy the confidence of the German political and corporate establishment, which criterion, apparently, Jain does not meet.

What if Jain decides to leave? The board is keen to retain him but is not fazed by the prospect of his departure because "everybody is replaceable" and "You cannot be held to ransom". Well said, indeed.

Government rejects IIMB proposals on autonomy

I resume blogging after a fairly long lay-off occasioned by various preoccupations.

Let me start with the news about the government rejecting IIMB's proposals for amending its MOA. (I must thank an anonymous reader for the tip-off). The proposals rejected are:

  • Ending the government's power to take over the administration and assets of the Institute if it is not satisfied with their functioning.
  • Making it mandatory for govt to seek Board approval for probing irregularities
  • Not allowing the government a role in setting the mandate for IIMB
  • Ending govt's role in deciding the fate of assets bought from govt money
  • Ending IIMB's responsibility for management education in the south
  • Selecting the director without approval of government
On the selection of a director, the ministry has indicated that it would like this to be done by a national collegium of experts. This, I think, is a good idea. A sub-committee of the Board to select the director because it allows insiders, including the Chairman and the Director, a decisive say in the selection process. Distancing the selection of the director from the institution is more conducive to a transparent and competitive search.

The ministry has also said it does not favour proposals to delink IIMB salaries from the government framework and end to reservations for specified groups in the BoG.

What do we make of this news? Well, it's no surprise at all because similar proposals from autonomy, made by IIMA in the past, have not found favour with the ministry. The surprise, if any, is that IIMB even submitted these proposals because the ministry had earlier informed the IIMs exactly what amendments it was willing to entertain.

It is clear that IIMB, like IIMA, has arrived at an interpretation of autonomy that it can hardly expect the government to entertain, namely, independence from government. I have always found it strange that institutions that owe their success to the fact of their being public institutions should now want to shed their public character. Especially so when there is nothing to suggest that it is the public character of these institutions that is coming in the way of their advancement.