Business Standard

IIM Bill - Towards better governance?

When the government assumes control, it will endeavour to bring uniformity in the functioning of all IIMs

Asish K Bhattacharyya 

Only a few Indian institutions of higher learning have earned global recognition. Three old Indian Institute of Management (IIMA, IIMB and IIMC) are among those few institutions. The government had established those three IIMs and funded their operation during the first three decades of their existence. Subsequently 10 more IIMs were established. Some of those have come into existence only recently. New IIMs receive government grant.

The Ministry of Human Resource Development (MHRD), government of India, had placed The Indian Institute of Management Bill 2015 (hereafter IIM Bill) for public Once the Bill is passed in both Houses of Parliament, the governance structure of IIMs will change. IIMs are worried that with the enactment of the new law, they will lose their 'autonomy', which will adversely impact their performance. Chairpersons of IIMA and some other IIMs have publicly opposed the proposal. There are reasons for that.

Institutions and enterprises that are established and supported by public money are instruments for achieving some socio-economic goals. Therefore, it is logical that the government should have control over those institutions. In case of institutions of higher learning like IIMs, the issue is balancing between control, and freedom and autonomy of operation.

It is widely accepted that the 'collegial system of governance' or self-governance is the most appropriate model for the governance of institutions of higher learning. The sponsor should articulate the purpose of creating the institution and provide a broad governance framework. It should distance itself to allow the institution the freedom and autonomy to pursue what it understands best. It can enforce accountability through such mechanisms as periodical review, accreditation and annual audit by an independent auditor. The governance model provided in the IIM Bill is not appropriate for the governance of IIMs.

The IIM Bill proposes that the board of governors (hereafter board) will be at the 'principal executive body', which will function under the oversight of the President of India, who will be the visitor. Out of the fifteen members, the government will nominate seven, directly or indirectly. The chairperson, who is the most powerful member of any board, will be appointed by the Centre. The director will be appointed by the Centre. The chairperson will nominate two faculty members. There will be two nominees of the Centre and one nominee of the state government. It will be difficult for these seven board members (almost 50 per cent of the board size) to act independently of the government. A board with so many government nominees cannot act independently.

Why should the government appoint the director? It should be the responsibility of the board, to hire the right person as the director. The board should establish a robust search and selection process. One should not be appointed as director because of his/her 'luck and networking'. Appointment by the government does not improve the appointment process. It might lead to politicisation of the same. Therefore, the government should distance itself from the search and selection of the director. Similarly, the faculty through an appropriate democratic process, for example, through election, should elect its representatives to the board.

Internal regulations formulated by the board shall require government approval before implementation. Regulations will cover, among other things, admission of candidates to various courses of study; the number of posts, emoluments and the duties and conditions of service of the academic and non-academic staff; the qualifications, classification, terms of office and method of appointment of the academic and non-academic staff; the manner of formation of departments of teaching; the fees to be charged for course of study and examinations; the establishment and maintenance of buildings; and the conditions of residence of students of the institute and levying of fees for residence in the halls and hostels and of other charges and delegation of power to the director. This shows that the government wants to micro-manage IIMs and to have 'substantive control' over those institutions. There are other provisions in the Bill that will strengthen the government control over IIMs.

It is natural that when the government assumes substantive control, it will endeavour to bring uniformity in the functioning of all IIMs. This is undesirable. Diversity leads to innovation and innovation can only lead to excellence. Each IIM should be allowed to decide its own governance mechanism, strategy, the process of executing strategy and performance parametres in its pursuit for excellence. Healthy competition among different IIMs is good.

The IIM Bill provides for the constitution of the academic council, which shall be the principal academic body. The council shall be constituted of the director, heads of departments, deans and faculty members. The functions of the academic council will be academic administration only. One may argue that even with the implementation of the new governance system, IIMs will continue to enjoy academic autonomy. This argument is not tenable.

The academic autonomy is intertwined with administrative autonomy. Strategy, including financial strategy, performance parametres, etc. all have a bearing on the choice of portfolio of activities by faculty, and thus has a bearing on academic freedom. Academic freedom is not the same as freedom for academic administration.

The IIM Bill, in its present form, will harm IIMs.

Affiliations: Professor and Head, School of Corporate Governance and Public Policy, Indian Institute of Corporate Affairs; Advisor (Advanced Studies), Institute of Cost Accountants of India; Chairman, Riverside Management Academy Private Limited E mail:

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First Published: Sun, July 12 2015. 21:34 IST