Command and control

Changes in the law will affect IIMs' autonomy

Last week, the Lok Sabha passed The Indian Institute of Management (Amendment) Bill, 2023. This Bill proposes significant changes, which will curtail the autonomy of the Indian Institutes of Management (IIMs) and reverse the government’s policy in this regard. The existing law mandated the board of governors (BoG) to appoint the director of an IIM, based on the recommendations of a search-cum-selection committee. But the changes in the law would now necessitate the BoG to take approval from the “visitor”. According to the Bill, the President of India will be the visitor to the institutes covered under the law. Further, the search-cum-selection committee will have a member nominated by the visitor. In effect, thus, the President or, in other words, the Union government will now be able to control the appointment of directors. Since the law envisages the director as chief executive officer of the institute and is expected to provide leadership, changes in the appointment process will give the government significant sway in the way these institutes are run.

The powers of the visitor, according to the new arrangement, will not be limited only to the director’s appointment. The current law provided that the chairperson of the board would be appointed by the board. According to the proposed changes, the person will now be nominated by the President. The visitor will also have the powers to initiate inquiries in IIMs. Based on the findings, the visitor can issue directives, which will be binding on the IIM management. The government will also prescribe conditions for the suspension or dissolution of the board of an IIM. Put together, the changes in the law will give enormous powers to the government, enabling it to influence how individual IIMs are run. Unsurprisingly, the change in the government’s stance has raised concern. Although the government has said it does not intend to interfere in their functioning, things can change over time. To be sure, the need for autonomy in such institutions of importance cannot be overemphasised. Operational independence from the government helps institutions adapt to the changing environment more quickly and effectively to attain their broad objectives. In fact, this was also the thinking behind the 2017 law, which imparted greater autonomy to the IIMs.

However, it is also important to emphasise that autonomy does not in any way undermine the value of accountability. The law, for instance, mandated the boards to appoint an independent agency or a group of experts to evaluate and review the performance of the institutes at least once in three years. As has been noted elsewhere, most IIMs did not follow this. A regular independent review of the institutes would have played a significant role in improving the quality over time. Comparisons among the IIMs would have also increased competition among them. There have also been problems related to the functioning and appointment of directors, an area that was not handled well. The critics thus can argue that the functional autonomy given by the law was not utilised by the IIMs in the right spirit. Despite some of the functional issues, the case for autonomy in IIMs remains strong. Nevertheless, now that the government has decided to change the level and nature of its engagement, it must make sure that the new system does not end up creating impediments for the IIMs in their pursuit of excellence in management education and research.