In 2017, Parliament passed the Indian Institutes of Management (IIM) Act. The Act, which hugely expanded the autonomy already enjoyed by the IIMs, contains an important clause. It requires the Board of Governors (BoG) of the IIMs to commission an independent review of the institutes at least once every three years and place the report in the public domain.
Six years on, very few of the 20 IIMs have done so. Among the top four IIMs, only the review report of IIM Bangalore is available on the website. This act of omission gives us an indication as to why the government thought fit to table the IIM (Amendment) Bill in Parliament last week. No government can take kindly to non-compliance with an Act of Parliament. The 2023 Bill seeks to take back from the IIMs the powers that the government ceded in 2017. The government seems to have judged that a dangerous governance vacuum has been created in the IIM system in the years since it relinquished control over these institutes.
Provisions of the Bill
The 2017 legislation was an extraordinary act of self-abnegation by the government. All key appointments — of the chairperson and board members, the director and the chairperson of the Coordination Forum of the IIMs — were left to the BoG. The government reduced the presence of the Central and State governments on the Board from four members to two.
The 2023 Bill seeks to undo many of the provisions of the earlier Act. It creates the post of Visitor, the President of India. The Visitor will appoint the chairperson of the BoG, one nominee on the selection committee for the director, and the chairperson of the Coordination Forum for the IIMs. He or she will also approve all director appointments. The Visitor can initiate any review of or inquiry into the affairs of an institute and remove the director on his or her own.
Media reports suggest that the government has been unhappy with the IIMs for their lack of responsiveness to queries and suggestions in recent years. But there is more to the about-turn.
There has been turbulence in the IIM system in recent years of a sort not seen in the nearly six decades until 2017. At IIM Ahmedabad, faculty and alumni were up in revolt against the then director’s decision to change the institute’s logo, and to demolish the Louis Kahn structures on the campus which are widely regarded as among the architectural marvels of our times. At IIM Calcutta, the majority of faculty signed a petition against the director’s way of functioning. The BoG took the extraordinary step of curtailing her powers following which she left before the end of her term. At IIM Rohtak, the government is locked in a legal battle with the institute over the director’s continuance in office. Anecdotal evidence suggests that some IIMs lower in rank have become petty tyrannies in which the director holds unchallenged sway. There has also been a relentless rise in the fee for the MBA course, which is not related to the costs of the course.
None of this should come as a surprise. The IIM Act created a situation where there were no meaningful checks and balances on the director. The absence of norms on key matters, such as the appointment of dean, had been evident even in the years leading up to the IIM Act as the government increasingly adopted a hands-off approach. The Act served to worsen the situation.
The director became accountable to a BoG in which the two government nominees played a passive role. Individuals from industry, alumni, etc., who comprise the rest of the Board, have no stakes in their respective institutions and no incentive to exercise the necessary oversight.
Moreover, the Act left answered the question: to whom are the boards now accountable? Boards in the corporate world are notoriously ineffectual despite the fact that they are subject to company law, regulation, and monitoring by financial markets. To expect a BoG that is accountable to none to be effective is to demand a leap in faith.
Many ask: how do private universities in the U.S. fare so well under boards of trustees? There are several reasons. Private universities are funded through large endowments; the state supports research. They are not in the game of making large profits on their academic courses. Boards are manned by large donors who have a deep emotional connect with the institutions. Educational institutions operate in a competitive environment that imposes almost the discipline of financial markets on boards. These factors don’t operate here.
Government control
The notion that government control is inimical to the functioning of an educational institution is flawed. The state-controlled universities in the California system, where the Governor of the state often sits on the board, are among the best in the world. Government control has not kept the IITs from creating a brand that is way above that of the IIMs. The IIM brand itself flourished for some six decades under government control because the IIMs enjoyed the fullest autonomy in all operational matters. It is the prospect of the brand being undermined by lawless boards and directors that should be a matter of concern.
The government’s move may not go down well with sections of the middle class who long to place at least one child in the leading IIMs. However, the verdict as of now must be that the government has shown courage in seeking to restore accountability in the IIM system. No public institution can be exempt from the principle of democratic accountability. And accountability to government and Parliament is preferable to no accountability at all.
