Time to revisit the IIM Act

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

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 of 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 area 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.
 

Illustration by Binay Sinha

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.

The writer is a former professor at IIMA. ttrammohan28@gmail.com