Hostile takeover bid 2.0

A seemingly innocuous Indian Institutes of Management Bill 2015, which severely dilutes the autonomy of the IIMs, has ignited fears that an unfinished BJP/NDA agenda of 2004 to acquire control and command over India’s premier B-schools, has been revived   Dilip Thakore

Beneath a deceptive everyday calm façade, there’s turmoil within the highly-reputed Indian Institutes of Management (IIMs), the country’s premier business schools, the first of which — IIM-Calcutta — was promoted by the government of India in collaboration with the Ford Foundation and MIT Sloan School of Management in 1961. A few months later, IIM-Ahmedabad was promoted in collaboration with the Harvard Business School on the western periphery of the country. Since then in response to demand from state governments, the number of these institutions of excellence promoted by the Central government and established by special legislation enacted by Parliament have multiplied to 13 countrywide.  

The anxiety which pervades the sprawling campuses of the IIMs has been ignited by a seemingly innocuous Indian Institutes of Management Bill 2015, drafted by the Union ministry of human resources development (HRD) and uploaded on its website for public comment and discussion.

Although the stated objects of the Bill are to designate them to be “institutions of national importance with a view (sic) to empower these institutions to attain standards of global excellence in management, management research and allied areas of knowledge” and to invest IIMs with degree awarding powers (hitherto under the IIM Acts they had been restricted to awarding postgraduate diplomas and fellowships), several provisions substantially expand the supervisory and regulatory powers of the Central government, i.e, the Union HRD ministry. Appointment of the board of governors, academic council, director, faculty and even syllabus and curriculum formulation are subject to government approval.

Suddenly, there’s pervasive fear, not only within the academic councils and faculty but within all ‘stakeholders’ — alumni, industry and students — that the national and global reputation of these B-schools painstakingly developed over six decades, could be quickly destroyed by a bull-in-a-china-shop BJP-led NDA government. These fears are not unfounded. Since it was voted to power in May 2014, the BJP-dominated NDA in New Delhi which draws its ideological inspiration from the Hindu majoritarian cultural organisation, the Rashtriya Swayamsevak Sangh (RSS) whose leadership and intellectuals are hell-bent on establishing the historical and scientific validity of myths and legends of ancient India,  has already played havoc in the Indian Council of Historical Research and the Film and Television Institute of India, not to speak of  state-level organisations such as the Madhya Pradesh Professional Examinations Board (see editorial p.12). Nor is it a national secret that infiltrating hindutva propaganda into school textbooks is high on the agenda of the RSS and the motley bunch of affiliated organisations known as the sangh parivar (RSS family) which includes the BJP, its political arm.  

And it’s pertinent to note that the Bill which has been uploaded on the HRD ministry’s website for just over a month, could become law overnight. S.1 (2) of the IIM Bill 2015, ominously declares that the legislation can come into force by a mere “notification in the Official Gazette”. Its authors have made no provision for debating the Bill in Parliament or referring it to the all-party standing committee of the HRD ministry.

In a refreshing departure from past practice of remaining mum on policy matters lest outspokenness hurts business prospects, the first off-the-blocks critic of the IIM Bill was A.M. Naik, the long-serving chairman of the engineering and construction major Larsen & Toubro Ltd, and chairman of the Board of Governors (BoG) of IIM-Ahmedabad. “As per the provisions of the Bill, we need to take prior permission of government in matters related to admissions, courses, fee structure, establishment or maintenance of new building and regulating powers of the academic council. Further, we will be required to take government’s permission if we want to form a new department in the interest of the institution, as if expertise for this is available elsewhere rather than with the institute. Thus, nothing much is left for us. It is like operating here but the control is somewhere else,” said Naik, addressing the media in Ahmedabad on June 24.

Other India Inc leaders have also voiced apprehension about the sweeping regulatory powers the Bill invests in the Union HRD minister and bureaucrats of the ministry. “If the Bill is passed in the current format, then there will be a revolt in the IIM system,” warns J.J. Irani, former chairman of Tata Steel and currently chairman of the Board of Governors of IIM-Lucknow, in a statement reported by Mint (June 29). Unfortunately but unsurprisingly, Irani failed to respond when contacted by EducationWorld.

A plain reading of the Bill makes clear why industry leaders and academics within the IIMs, if not beyond, are convinced that if passed in its current avatar it will severely curtail the already diluted autonomy which the Central government-promoted IIMs enjoy. Under s. 10 (1), the President of India (who is constitutionally obliged to act on the advice of the Union government) is the Visitor of all 13 IIMs which are obliged to comply with his directions. Although the board of governors is authorised to constitute a search-cum-selection committee to shortlist a number of eminent educators for the director’s position, the President/Visitor is authorised to reject the entire short-list and ask the search-cum-selection committee to “make fresh recommendations” (s.17 (3) (iii)).    

Moreover, under the definitional s.3 (k), the BoG is authorised to make “regulations” for governance of the IIMs. But these regulations need “approval” of the Central government. This despite the BoGs being packed with Central government appointees and s. 11 (2) (a) stipulating that the chairman of the BoGs will be appointed by it. In addition, two nominees including a finance expert will be appointed by the Centre (s.11 (2). Other members of the 14-member BoG include a representative of the state government; “four eminent persons” nominated by the BoG; a distinguished scheduled caste/tribe representative nominated by BoG; three board members co-opted from distinguished alumni or promoter-society members and the director of the institute. From among the faculty whose members are likely to have deep and intimate knowledge of the institute, only two members are on the BoGs.

Indeed, it’s a telling indicator of the stifling control-and-command mind-set of the HRD minister and bureaucrats within the ministry that even regulations stipulated by packed BoGs need to be “approved” by the ministry. Moreover, even the packed BoGs are not authorised to determine the remuneration and perquisites of the director; they have to be “prescribed” by the Central government (s.17 (2)).  

Several other provisions of the Bill deny the BoGs even the most elementary powers of governance and vest them in the Central government/HRD ministry in distant New Delhi. Under s.30, a Coordination Forum chaired by the Union HRD minister and filled with Central and state government bureaucrats is constituted to “facilitate the sharing of experiences, ideas, concerns with a view to enhancing the performance of all institutes”. Among its other duties: to institute academic and research scholarships for scheduled caste and scheduled tribe students, deliberate on matters of common interest referred to it by any institute and promote coordination and co-operation inter se.

"It is important to note that the IIM Bill 2015 doesn’t make any differentiation between the older well-established IIMs which feature in the Financial Times, London’s global B-schools rankings, and new institutes promoted recently. The Bill is a typical bureaucracy convenience  response. Since the number of IIMs — each established by separate Acts of Parliament — has increased from five to 13, each with its own character and problems, they have reduced it to  one standardised problem. It’s quite obvious the bureaucracy discerns a need to acquire greater control over the reputation and resources of the better-off institutes. And greater uniformity will give greater control. Therefore, powers of the BoGs have been circumscribed by the ministry. This Bill is totally inconsistent with the slogan with which the incumbent BJP/NDA government was elected to power last year, viz, minimum government and maximum governance. An approach consistent with this election promise would restrict the role of the government to oversight of the BoGs and the Central government empowering BoGs by removing the hurdles in their way to achieve excellence in management education,” says K.S.R Murthy who served on the IIM-A faculty for almost two decades and as director of IIM-Bangalore (1991-97), and is currently a Bangalore-based management consultant.   

The extent to which the power of the management — BoGs, academic councils and directors — with no distinction made between the older institutes, some of which have developed institutional management traditions, systems and processes over half a century, has been circumscribed is evident in the language, tenor and overriding powers invested in the HRD ministry/government by ss.35-36 of the Bill.  

Under s.35 the Central government is vested with a general power to make rules “for carrying out the provisions of this Act”. This includes regulating the manner of appointment of the chairpersons of all BoGs, determining their terms and conditions, and stipulating the terms and conditions of the director it appoints under s.17 (2).

Moreover, under  the omnibus s.36, the HRD ministry/Central government reserves the right to “approve” the decisions of the BoGs in determining the tenure, remuneration and terms and conditions of all employees of the 13 IIMs; rules and regulations framed  for  admission of  students, and their tuition fees;  the number of posts, emoluments, duties and conditions of all academic, technical and administrative staff, specifying their qualifications, classification and terms and conditions of appointment. Indeed s.36 (2) of the Bill contains 23 sub-sections which empowers the ministry/government to overrule almost all the administrative rules and regulations made by the IIM managements.

“To attract high-quality faculty, researchers and students and achieve global excellence — the stated objective of the IIM Bill — the institutes need to be given sufficient autonomy to manage their academic and administrative affairs. The latest version of the IIM Bill substantially reduces the autonomy of the IIMs and enhances the oversight of the Central government to a level which will hamper achievement of the goal of global excellence. Several clauses of the Bill undermine the autonomy of the IIMs. In some very important matters such as faculty compensation, the power of IIM directors is very limited in comparison with Deans of leading B-schools abroad. In our several consultations with the HRD ministry, we have suggested removal of the phrase “with the approval of the Central government” in s.3 (k) and s.36, as also to qualify the wide ambit of s.21 of the Bill,” says Dr. Sushil Vachani, an alum of IIT-Kanpur, IIM-Ahmedabad, Harvard Business School and former tenured professor of strategy and innovation at Boston University for 28 years,  and currently director of IIM-Bangalore (estb.1973).  

Vachani’s plea for institutional autonomy — globally acknowledged as the sine qua non of academic excellence — is couched in mild, conciliatory language. Yet the plain unvarnished truth is that Union HRD minister Smriti Irani (who will shortly have to answer the Supreme Court why in her nomination papers filed before the Election Commission she claimed to be a graduate when she is not), and the grey generalist bureaucrats  who drafted this Bill, seem to actually believe they are better qualified to manage globally-respected B-schools teaching complex management subjects than highly educated and experienced academics.

It’s a wonder they haven’t appropriated the power to prescribe a convenient common syllabus for the IIMs  — a privilege not snatched from the academic councils of the institutes, although under the sweeping s.21, the Bill reserves the power to “give directions on questions of policy, as the Central government may give in writing from time to time”. Therefore it can’t be ruled out that the ministry will order that the IIMs teach Vedic management practices and processes and/or civic management in ancient Ayodhya since the government’s decision on “whether a question is one of policy or not shall be final” (s. 21 (2)).

Unsurprisingly, some academics believe that critics of the Bill are seeing phantoms and overreacting. They cite the example of the country’s 16 Central government-promoted Indian Institutes of Technology (IITs) which are governed by a common Indian Institutes of Technology Act, 1961.“The IITs have a higher standing globally than the IIMs. Admissions, curricula and faculty recruitment at the IITs have all remained free from government interference. If the IIT Act has not cramped the IITs, why should we believe that the proposed IIM Act would erode the autonomy of IIMs?” reasons  Prof. T.T. Ram Mohan, professor of finance at IIM-A in an op-ed essay in The Hindu (July 1).

In support of his argument, Ram Mohan cites the example of the state (government) universities of California and Texas in which the majority of BoG members are appointed by state governors, and are of “the highest quality”. Ergo, government control of academic institutions in India isn’t  necessarily inimical to academic autonomy and freedom, he argues.

This argument is disingenuous to say the least. For one, there are widespread complaints from Indian industry that in recent years the quality of engineering and technical education dispensed by the IITs suffers by global comparisons. Prof. Ram Mohan’s assertion that the IITs enjoy a higher ranking than the IIMs in the QS and THE World University Rankings (WURs) is not entirely correct because the IIMs are not ranked in the WURs.

However, in the Financial Times Global MBA Rankings 2015, IIM-A is ranked # 26 worldwide and # 2 on the parameter of ‘career progression’, second only to the Stanford Graduate School of Business. IIM-Bangalore is also ranked among the FT Top 100 (# 52) and # 5 on the career progression parameter (see p. 66).

Moreover, all is not well in the country’s 16 Central government-promoted IITs. Tuition fees are pitched too low, residential accommodation is slummy and under the new BJP/NDA government, two directors have resigned citing excessive interference from the HRD ministry.

Yet perhaps the most compelling argument against the control-and-command provisions of the IIM Bill 2015 is that this isn’t the first time the BJP leadership has attempted to grab control of the IIMs. A decade ago, then Union HRD minister Dr. Murli Manohar Joshi made an audacious attempt to cut the too-independent-for-his-liking IIMs down to size.

In 2003 Joshi commanded all IIMs to sign a memoranda of understanding under which they would surrender institutional endowment corpus surpluses exceeding Rs.25 crore to the ministry on promise of guaranteed need-based funding.

Unsurprisingly the older, premier ABC (Ahmedabad, Bangalore and Calcutta) IIMs which had painstakingly built up endowment corpuses of Rs.60-100 crore at the time demurred, citing a 1992 report of the late legendary Dr. Verghese Kurien (1921-2012) who authored India’s milk revolution, which advocated IIMs to attain “financial independence”. Stalemated, on February 5, 2004 Joshi issued an order directing all IIMs to slash their already modest Rs.1.5-1.75 lakh per annum tuition-cum-residence fees to a uniform Rs.30,000 on the ground that they were “exorbitant”.

Contrary to Joshi’s expectation, this populist proposal designed to make the IIM managements heavily dependent upon HRD/Central government largesse, provoked widespread outrage in industry, the media and even the students’ community. 

EducationWorld reacted by publishing a detailed cover story (‘Outrage! Joshi’s IIM-grab angers middle class India’, EW, March 2004) which recorded the protests of several industry leaders (N.R. Narayan Murthy, Jaitirth Rao (“trojan horse for eliminating autonomy”) and academics (Dr. Pratap Bhanu Mehta, Dr. P.V. Inderesan, among others). Subsequently Delhi-based advocate and academic Sandeep Parekh filed a writ petition in the Supreme Court praying for an order to quash Joshi’s directive. In the petition, Parekh argued that if the minister’s order wasn’t quashed, IIM-A which then had a corpus of Rs.100 crore, would become “bankrupt in 3.8 to 6.5 years, unable to run even its current account expenses”.

Although a Supreme Court bench presided by Chief Justice V.N. Khare was less than sympathetic and speculated why the IIM managements themselves had not complained about the February 5 order and directed the Central government to provide IIM balance sheets of the past five years, surprisingly the students community, which is invariably in the vanguard of agitators demanding tuition fee subsidies, was quick to see through the BJP/Joshi stratagem. And when General Election 2004 was called, even as the matter was pending in the Supreme Court, a cohort of students in Allahabad (Joshi’s Lok Sabha constituency) went door-to-door to campaign against Joshi and ensured his defeat. Moreover the BJP despite — or perhaps because of — its multi-million rupee Shining India electoral campaign, was roundly trounced and the party’s attempt to bring the IIMs to heel, lapsed. Now a decade later, the same objective is proposed to be attained through enactment of the IIM Bill 2015, which concentrates powers of superintendence and regulation of India’s premier B-schools in the HRD ministry.

It’s not this writer’s case that the IIMs, established at great cost to the public exchequer and lavishly provided sprawling campuses with infrastructure infinitely superior to the great majority of higher education institutions in post-independence India, don’t require supervision and regulation. The plain truth is that the cost-benefit ratio to the nation of the IIMs is questionable.

The lament of the great and largely unsung management guru the late Prof. N.S. Ramaswamy, founder-director of IIM-B (and JBMIS and NITIE, Bombay), was that  generally mediocre directors and  faculty of the IIMs have never been able to shape or inspire their  students  to become involved with great national-building projects of the railways, road transport corporations, electricity boards, airports, public sector banks and insurance companies which urgently require their skills and expertise.

“The IIMs must exhibit a willingness to train their faculties and HRD ministry could subsidise this activity, instead of subsidising the education of students who inevitably land highly paid jobs in multinationals and top private sector companies in India and abroad. But the training and development needs of public sector enterprises whose inefficiencies directly hurt millions of citizens receive scant attention in the IIMs whose proud managements are blindly imitating flawed Western models,” Ramaswamy told EducationWorld more than a decade ago.

Certainly, the BoGs and directors of IIMs whose capabilities generally tend to be in inverse proportion to their egos — despite repeated reminders the directors of IIM-Ahmedabad, Calcutta, Lucknow, Raipur and Ranchi, ignored EW telephone calls and failed to respond to e-mailed queries relating to the IIM Bill 2015, which one would have thought is a life-and death matter for their institutes — need to be accountable. The general consensus is that IIM graduates tend to do well in their corporate careers and trajectories, not because of the top brass and faculty of these pampered institutes, but because they admit the cream of college undergraduates after rigorous testing. The 2 percent from among the 170,000 who write the IIMs’ annual CAT (Common Admission Test) and are admitted into the institutes tend to be driven self-learners who make good use of the IIMs’ excellent libraries and peer learning opportunities. On the other hand, it’s difficult to recall any breakthrough business industry/agriculture idea or innovation which has emanated from the faculty of the country’s prized IIMs.

therefore, it’s indisputable that the IIMs promoted and nurtured for several decades by generous grants from the public exchequer, need to be accountable to Parliament and society. Quite rightly, there’s sufficient representation of Central and state governments and of society and academia on their BoGs, and the Coordination Forum proposed by s.30 of the Bill to safeguard the public interest and ensure efficient management. Consequently, the other sections of the Bill — especially ss.3 (k), 21, 35 and 36 — are superfluous and need to be substantially diluted, if not eliminated.

In light of the reality that the draconian IIM Bill 2015 is the second attempt of the BJP to seize complete control of the IIMs, clearly, there’s a long-term strategy at play.“The sprawling, well-equipped campuses and high living standards of the IIMfaculties  have attracted the attention and envy of the subaltern intellectuals of the RSS, sangh parivar and BJP who believe they need to be indigenised with the introduction of ill-defined and amorphous Vedic management programmes and courses. It must also be noted that the ABC IIMs have become financially independent and begun to build sizeable endowment corpuses.

This raises the possibility of some IIMs being able to pay star professors and faculty globally benchmarked salaries. This is anathema to IAS bureaucrats in the HRD ministry and government who have succeeded in keeping the salaries of managers of public sector enterprises and institutions below their own. Therefore the strict controls — especially over remuneration — imposed by the Bill. Together, these forces could destroy the IIMs,” warns a senior professor of an IIM who spoke to EW on condition of anonymity.

This warning should not be taken lightly. Already within a year of assuming office in New Delhi, the BJP/NDA government has recklessly appointed patently unqualified chairmen/heads of the boards of the Indian Council of Historical Research, Film and Television Institute of India, Indian Council of Cultural Relations, National Book Trust, and prompted the resignation of two IIT directors.

“The Indian government has great difficulty in distinguishing between two different roles, viz, the role of government that spends public money. That is true in every country in the world. The other is to treat academic institutions as if they are under the authoritarian command of the government. That distinction is very important and the former should not be seen as the latter,” economics Nobel laureate and former Master of Trinity College, Cambridge (UK), Dr. Amartya Sen, who recently stepped down as chancellor of the ambitious Nalanda University because of the “hostility” of the BJP/NDA government, told the business/economic daily Mint (July 8). 

Time for 21st century India’s somnolent intelligentsia and apathetic educated middle class to wake up, and speak up.