IIMA logo controversy-II: autonomy and the IIM Act

IIMA and the two other leading IIMs have enjoyed considerable autonomy ever since they were set up. Nevertheless,  starting in the early 2000s, faculty and the director set up a clamour for more autonomy, especially financial autonomy. I have never been able to quite figure out what they wanted. I guess they wanted full freedom of pricing in respect of the various programmes. They may also have been keen to come out of the Pay Commission straitjacket for faculty pay.

In 2008, freedom of pricing was granted: the fee for PGP  was increased by more than 150 per cent (and without any consultation with faculty whatsoever). Yet, the clamour for autonomy did not die down. The community wanted to be free from any sort of government control.

I was a little sceptical about this demand myself. My suspicion was that more autonomy meant freedom for the director to do as he pleased without any checks on the part of the government. It would not translate into more faculty autonomy. I sensed that the faculty's position would worsen if we came out of the government fold in practice, even if legally we we remained a public institution.

Some time in 2015, Smriti Irani introduced a draft IIM Bill that introduced better checks into the IIM system - or at least that was my view. The then director, Ashish Nanda, and several faculty decided to oppose it.

I saw nothing wrong with the Bill and wrote an article in the Hindu saying so. I pointed out that the IITs had done quite well for themselves while being under government control and that the IIMs need not fear any undue government intrusion. To my surprise, my article drew a torrent of favourable responses on the faculty notice board. As I mentioned earlier, faculty had long demanded more autonomy. However, over the years they (a large section of faculty) had seen the drift of power away from themselves to the  director and the board over the past decade and had come around to my view !

The Ministry of Human Resources Development (MHRD) invited responses to the draft Bill. Nanda circulated a note that was highly critical of the draft Bill. It was  to be sent to the Ministry via the online link provided. I wrote to him saying that I disagreed with him. The question of greater autonomy, I said, had not been properly debated by faculty. I suggested that the matter be debated and a vote taken on the draft Bill. Only if the vote was in favour should his note be sent as the Institute's response, otherwise it should go strictly as his personal response. 

Nanda did not reply. He and the then Chairman, AM Naik, went on to hold a press conference where the Chairman denounced Irani for trying to reduce the IIMs to a post office of the government. Irani took umbrage and gave vent to her feelings in a TV interview.

The debate I had asked for never happened. Nanda (and a few other IIM directors) kept meeting with the government. In the meantime, it turned out that the PMO itself favoured much greater autonomy than Irani had contemplated. Irani was moved to another ministry and Prakash Javadekar took her place. Thereafter, in 2017, the IIM Act was enacted which took the autonomy of the IIMs to a higher level.

The point is that the views of IIM faculty were not factored into the drafting of the Act. The dialogue was between the government and a few IIM directors.

Once the Act was passed, the number of government nominees on the Board of Governors was reduced from four to two. These two nominees (one each of the central and state government) ceased to take interest in the proceedings, leaving it to the rest of the board to take all decisions. The other members on the board are representatives of industry, alumni and two faculty of the Institute. 

Everybody knows what the 'board' anywhere is, even in the corporate world. It is basically the CEO. The CEO comes up with proposals which boards duly approve, except where there is a serious crisis in an organisation. Now, this is the case even in the corporate world where boards are subject to company law, securities regulations, exchange regulations, investor scrutiny, etc. The majority of boards are dysfunctional and ineffectual, which is why we keep going on and on about corporate governance.

In the IIM context, boards are not subject to any of the checks mentioned above. Nor is the government now acting as a check. The result is that autonomy has, in effect, become untrammelled freedom for the director. This is the case even at the leading IIMs. One can well imagine the situation at the lesser IIMs.   

This has been going on for some five years now since the IIM Act was passed.  Within six months of taking over as director, Nanda proposed that the iconic Louis Kahn structures (including faculty and staff residences) be demolished. He wanted faculty and staff to move into multi-storied structures to be built for them at one corner of the campus near the Azad Society gate. An exception would be made for the director himself- he would he housed in a newly constructed bungalow.

Faculty asked what would happen to the entire stretch between the Azad gate and the main building. Nanda said it would be a "green area'. We heard unofficially that the entire construction project would cost more than Rs 200 crore. Fortunately, the board did not favour the idea. Many of us wondered why the construction of new buildings would be a priority for a director who was said to have come on a two year sabbatical from Harvard. We had supposed that institution-building was more about institution than building. 

In 2020, the present director and the board revived the proposal. The staff residences near Azad gate were demolished. Two ugly, multi-storied structures are under construction. The director wanted to do away with the student dorms as well except for a few outer ones. The main building structures would remain. There was an outcry not just in India but abroad. Several petitions were sent to the Chairman.  That stopped the board in its tracks. 

The point is not that existing structures can never be replaced by new ones. But the case for doing so has to be properly made. Can the existing structures not be renovated using current technology? What are the relative costs of renovation and new construction? Alas, such a case was not made. The project was sought to be rushed through under a cloak of secrecy.  

Now, we have the logo controversy. I have written about it in my earlier post.  The issue is the same: why are these decisions being taken without proper consultation with all stakeholders?

The answer is that greater autonomy has meant poor oversight and no checks on the director. That is why we are now seeing a faculty revolt at IIMA. The government needs to understand this. The situation cannot be rectified by merely arriving at a compromise on this issue. We need to step back and examine where the IIM Act went wrong. 

I am afraid the situation cannot be set right without government intervention and a re-look at key provisions of the IIM Act. 

I have written about it in my column, Time to revisit the IIM Act,  in BS. The article is reproduced below for those who don't have access to the website.

Time to revisit the IIM Act

The government must jettison its hands-off attitude towards the IIMs and address the governance deficit

T T Ram Mohan

There has been turbulence at IIM Ahmedabad (IIMA) in recent weeks. Almost half the faculty are upset with changes in the logo announced by the director and have written to the chairman of the Board of Governors. Faculty members have also raised issues of governance, including violations of long-established norms.  

Other IIMs have not been free from trouble. At IIM Calcutta, there was a breakdown in communications between the previous director and the faculty in 2021. The matter was resolved only by the departure of the director before her term ended. At IIM Rohtak, the board gave a second term to the present director even as a controversy attending his first term remains unresolved. One could go on. There is a case for reviewing the experience with the IIM Act of 2017, and making the necessary course corrections.

IIMA is the premier management institution and has historically had the best governance amongst the IIMs. It is worth taking a closer look at IIMA following the IIM Act and deriving the necessary lessons for governance in the IIM system.

The issue at IIMA is not merely the changes to the logo. It is also the process followed in doing so. The director got two logos approved by the board and then informed the faculty about the change. It doesn’t seem to have occurred to the board to ask: What does the faculty think?

That hurts. IIMA has long prided itself on being a faculty-governed institution where key decisions — admissions, placement, course syllabi, recruitment of faculty, etc. — are taken by the faculty. That is its uniqueness and the secret of its success.

Over the years, faculty governance has got eroded and decision-making has moved from the faculty to the board. A pivotal moment came in 2008 when the institute announced a more than 100 per cent increase in the fee for its post-graduate programme. The faculty were informed about about the biggest increase in fee in IIMA’s history after the board had approved it.

Several issues agitating the faculty have remained unresolved. One that has figured in the current controversy is the appointment of two faculty members to the board. The noble intent was that the two members would act as a bridge between the faculty and the board. At IIMC and IIMB, the faculty elects its representatives to the board. At IIMA, the director selects them.  As a result, faculty members on the board at IIMA are not spokespersons for the faculty body.  Another contentious issue is the absence of norms for the appointment of Dean, a post one rung below the director. 

The IIM Act has given a fillip to the erosion of faculty governance at IIMA.  The leading IIMs had enjoyed considerable autonomy even before the IIM Act. The Act gave formal shape to such autonomy and enhanced it by leaving the appointment of the chairman and the director to the board. 

The crucial change that has come about after the IIM Act is that the government decided not to influence the working of the IIMs. The central government and the state government have one representative each on the boards. These nominees play a passive role where they used to be active. Earlier, faculty could expect the government to intervene if the chairman was unresponsive. Now, they have little recourse. 

The IIM Act says that the board is accountable to the government. It requires IIM boards to evaluate the performance of the institute once every three years through an independent agency, submit an action taken report to the government and place the report in the public domain. A visit to the websites of IIMA and IIMC fails to elicit any such report.  At IIMB, an external review is said to be nearing completion. The Ministry of Education must immediately ascertain how many IIM boards are compliant with the relevant provisions of the IIM Act.   

In the US, the boards of higher education institutions are filled with large donors who have enormous stakes in those institutions. Competition among the leading schools is fierce. Both these factors make for accountability. If a school’s ranking drops sharply, heads will roll because the boards care. 

In India, the leading IIMs do not have meaningful competition. Board members come and go and have virtually no stake in the IIMs. It is futile to expect IIM boards, as they are constituted today, to enforce accountability or provide redress.  

We thus have a serious governance deficit in the IIM system. There is no meaningful accountability of the director or the board. The governance deficit needs to be addressed. 

First, the government must jettison its hands-off attitude towards the IIMs. Until such time as a regulator for higher education is created, the government will be required to play the role of umpire at the IIMs. 

The IIM Act must be amended to revert to the earlier position of four government nominees, two each from the central and state government. These nominees need not be from the Ministry of Education. The government may appoint qualified persons to represent it in the same way it appoints independent directors at public sector enterprises.  Once the government nominees start playing an active role, comatose boards will spring to life.

Secondly, the government must constitute an IIM Advisory Board (IAB) that is tasked with commissioning an independent performance audit of each IIM every three years as required under the Act. It makes no sense to ask the boards to commission the audit because the boards themselves need to be evaluated.  The IAB may also be asked to propose chairmen and directors for the lesser IIMs and, if thought necessary, for the leading IIMs as well. Its role would be similar to that of the Banks Board Bureau for public sector banks. 

Thirdly, the IIM Act must be amended to ensure that faculty members on the board are chosen by the faculty and not by the director.

Fourthly, the government nominees on the board must insist on clearly defined criteria for important posts such as those of Dean, membership of the board and membership of the Committee that evaluates faculty. 

The IIMs are public institutions that owe their autonomous status to the generosity of the government. It would be tragic if the formidable brand equity of the IIMs were to be squandered for want of accountability in the system.