Wednesday, July 01, 2015

IIM Bill: what's the fuss about?

The ministry of HRD is embroiled in yet another controversy involving the IIMs. Such confrontations have been going on since 2004 when Murli Manohar Joshi, then HRD minister in the NDA government, wanted the IIMs to reduce their fee for PGP to Rs 30,000.

Every time, there is a run-in with the government, the IIMs contend that their autonomy is under threat. Legions of alumni are mobilised. An adulating middle class and a media that believes that government can do no good rush to the support of IIMs. Politicians and bureaucrats beat a hasty retreat. We have seen this played over and over again.

Thus, in 2007, the government advertised the post of director of IIMA. Faculty and alumni went to town saying this was a threat to autonomy! One would have thought that they would have insisted on the widest advertising and search for the post.

In 2005, IIMB wanted to set up a campus in Singapore. The then minister, Arjun Singh, stalled this, saying they needed to create more seats in India in the first place, not an unreasonable point. IIMB claimed its autonomy was under threat. There was a huge ruckus. In 2010, Kapil Sibal called their bluff. He said they could go ahead. Nothing has been heard of the proposal since.

On another occasion, the government advised the IIMs to reduce their board size from an unwieldy 25 to around 15- a perfectly sensible suggestion. Again, the war cry of 'autonomy in danger' was raised before the IIMs came around to accepting the proposal.

I happen to have studied the history of IIMA and written about it (Brick by Red Brick). In the course of my research, I was struck by the fact that no chairman or director of IIMA had ever complained about lack of autonomy for nearly four decades until the early 2000s. That was a period in which IIMA and other IIMs were heavily dependent on government for funds- and yet there was no talk of government interference. If anything, those at the helm of IIMA had showered praise on the government for its support and restraint.

Things began to change in the early 2000s once the leading IIMs ceased to depend on government of funds- thanks, initially, to burgeoning consulting income and, later, to steep increases in the fee charged for various programmes. Some directors reckoned that since they were not taking money from government, it suited them not to be subject to government oversight. (Going by this logic, ONGC and SBI should also be resistant to government oversight- not only are they not taking money from government, they hand in generous dividends!).

That's how the clamour for autonomy started. Some of the IIMs articulated their position on autonomy through Position Papers. What do they mean by autonomy? The leading IIMs, notably IIMA and IIMB, would like to become board-driven institutions, with the government only setting very broad objectives. All major appointments- the chairperson, board members and the director- would be done by the boards. The board would decide the fee. The board should also be free to delink compensation from government so that the IIMs could become globally competitive (a privilege not granted to ONGC or SBI, which are commercial entities).

It astonishes me that those who make these proposals should show lack of understanding of the legal position. There was report on the IIMs prepared by V K Shunglu, former CAG, in 2004. He said that the concept of autonomy espoused by IIMA was simply not supported by the Articles of Association of the Institute. Shunglu cited a Supreme Court judgement that upheld the government's right to regulate admissions, fees and service conditions of employees even in private aided institutions.

If the IIMs come to be covered by an Act of parliament, it will be even harder,legally speaking, for government to adopt the hands-off approach that the IIMs want. After all, the government is accountable to parliament. It is just not possible for the government to leave all matters, including matters of governance, to the IIM boards. The self-perpetuating board- with the chairperson and members being appointed by the board, as also the president of the university- is a feature that obtains in private universities abroad, not in public universities. What the leading IIMs propose thus amounts, in effect, to an attempt at privatisation of the IIMs.

Legalities apart, there's the question of who will enforce accountability in the IIMs if the government were to withdraw. The IIM boards consist of people with little stake in the institutes. So when people say that matters should be left to IIM boards, they mean, in effect, that matters should be left to directors. Government withdrawal would thus result in a dangerous governance vacuum at the IIMs.

One last point. If I can write freely today not only about IIM matters but also on matters of public policy, it's because I'm protected by the service rules of the government of India . Government is thus the saviour and protector of my autonomy. I must confess that the prospect of being at the mercy of an all-powerful board - and, by implication, an all-powerful director - fills me with more than a little trepidation. 

More on the IIM Bill in my article in the Hindu, No reason for IIMs to be alarmed.


Amar Ranu said...

Excellent read, Sir. I think you put your points well and IIMs are answerable to the parliament. If it is made by Act of Parliament, they would abide by all rules and regulations.
It's better they abide now.

Jayadeva EP said...

Sir, you have succintly brought out the autonomy ruckus is a case of much ado about nothing. Persons or Directors who do not have financial stake in organisations cannot be expected to be totally unbiassed in their decisions. A great eye opener for non-IIM educated middle class.

T T Ram Mohan said...

Amar Ranu and Jayadeva, Many thanks for your kind words.


Anonymous said...

Dear Prof TT Ram Mohan,

Thanks for the wonderful article.

IIM's post autonomy have only achieved one quantified (correlated) objective i.e. Increase in student fees on an exponential scale (forget Inflationary rate benchmark or even housing price bubble)...or for that matter rate of increase in median salaries of an IIM A passout. IIM's have increased their fees at a rate, which I would like my savings to earn interest on (some logical increase and a lot not so)

I personally believe IIT's (Government funded) have contributed significantly more to the Indian Economy and the Global Economy compared to the IIM's (please mark significant).

Thank you for placing your thoughts.

T T Ram Mohan said...

Thanks, Anonymous. It's gratifying to note that so many comments both on my blog and at the Hindu's website have been hugely supportive.


Sandeep Parekh said...

Great post TTR - I have tweeted your blog post...

T T Ram Mohan said...

Thanks Sandeep for the publicity!


Anonymous said...

Excellent post!
As Anonymous 1 here pointed out this cri passionné for autonomy arising from having finally obtained (through raising price -fees- being a monopoly or oligopoly of the IIMs) financial independence Currently IIMA management ( director and faculty) have as much autonomy and much more to do what they are doing already. As per apocryphal story there are as many opinions at the IIMA as no of faculty on any given issue! As you have rightly mentioned faculty and staff (given great life style with all amenities in large gated lush green surroundings with so many holidays and vacations) are protected by GOI service rules and enjoy tenure and security respectively without pressure faced by their counterparts (who are on contract and work harder and are less remunerated) in private educational institutions. So one cannot have cake (security)and eat it too (autonomy) !

Anonymous said...

Dear Prof.,

I support your stand but have inhibitions in expressing it non-anonymously.

I think there are two issues here. Firstly, in a corporate setting, the board represents the shareholders. Whom does the IIM Board represent? Not the staff (teaching as well as non-teaching) as there are only two professors and no non-teaching staff in the board. On the other hand, the government is the promoter and owner of IIMs. Thus the board is an administrative tool of the government and hence, it cannot replace the government.

Secondly, why are the top IIMs so highly regarded. The simple answer is that graduates from here command the highest salaries in India. The longer answer is that there is a virtuous cycle due to which IIMs attracts top talent as well as top recruiters. The expectation that they will get a high salary attracts top talent and the expectation that they can recruit top talent attracts top recruiters. This virtuous cycle started when the IIMs were able to attract top talent and the IIMs were able to attract top talent from their inception because they were funded by the government. Thus the brand value of the top IIMs owes more to the government than to any other collective entity, either the board or the faculty.

If IIMs owe their brand value to the government, protesting against government interference does not look very nice.

T T Ram Mohan said...

Anonymous and anonymous, You have both put it very well. But it's not just that government has supported the IIMs in the past and hence IIMs should not try to detach themselves from the ministry. Monitoring and regulation by the government in the future too is necessary for the IIMs' well-being. The alternative monitoring authority, the board, has just not measured up thus far. When the IIMs argued that matters should be left to boards,they are saying in effect, "Leave everything to the direcrtors". That, I would submit, is not a desirable state of affairs.