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Governance Models for IIMs & IITs

Economic Times - April 7, 2008

The HRD minister must be congratulated - and thanked - for wholeheartedly accepting the propositions that educational institutions should be governed by their governing boards; and that there is nothing wrong with a plan that delivers self-sufficiency with social justice. We look forward to this being the direction in which he will encourage all educational "navaratnas" to move.

The purpose of this article is to provide facts and perspectives in order to frame the debate on governance of IIMs and IITs and the role of MHRD. It would be a waste of this space to further stir up the already muddied waters of the fee increase issue.

Suffice it to say that social justice is not served by subsidising people who have an average starting salary of around Rs 17 lakh and access to pre-approved loans with banks who deem them creditworthy based on where they are going, and irrespective of what their parental income is. In fact, such subsidy is a social injustice to the urban poor, who, data shows, are walking out of government schools into costlier private schools.

For the record, beyond loans, the IIMA financial aid scheme has graded tuition waivers linked to parental income, and concessions for those who wish to join NGOs, government, institutions of public good, etc., which pay much lower. Further, if there is a concern that such a high fee number would discourage children from the weaker sections of society from even thinking of such institutions, then the solution is not to subsidise fees but to say loudly and publicly through every communication channel available that no one who qualifies will ever be turned down for lack of funds, and that repayment of loans is easy and systematic given earning potential.

If MHRD wants to subsidise something in the name of social justice, they should pay for a continuing ad campaign on television saying this on behalf of all IITs and IIMs; and announce at least 1,000 merit-cum-means scholarships each for IIM and IIT potentials for education from class IX onwards, which will cover all expenses including coaching classes, to enable them to get into these institutions and be role models for others. At the minister's behest, this can be put into place in the next one month, and we look forward to it.

Now let us move to governance. IIMA has a very visionary governance structure, and is an early example of a sophisticated public-private partnership in education. It is, in theory, supposed to be governed by a Memorandum of Association (MoA) between IIMA Society (a not for profit entity), the central government (CG) and the state government of Gujarat (SG). The MoA clearly lays out board seats' composition and process for filling them and the powers each party has in running the institute. Just FYI, fee setting is listed in the MoA as within the powers of the society and hence the board (through which alone MHRD can influence). Equally, the MoA states that "all posts are in the cadre and scales of pay as approved by CG from time to time" and that the director's appointment shall be made on "such terms and conditions" as may be decided by the CG in consultation with the SG.

Of course, like all MoAs with the government, it can (and has) been used quite creatively. There is a clause that says that IIMA Society can acquire and hold property, provided prior approval of the CG, SG has been got for the acquisition of immovable property. It is this clause that gets used to "order" IIMs to not expand to any other geography, because even long-term leases must be viewed as immovable property! Someone smart said, quite rightly: "

Let us be innovative - why don't all the IIMs jointly set up third party facilities that can be used as outreach campuses and circumvent this creative interpretation of the MOA"? Good idea, but perhaps the creative energy of the educational institution and its faculty is better used for doing the job it was created to do, rather than in playing cat and mouse games with the other side.

There is a final killer clause in the MoA. "The CG may at any time appoint one or more persons to review the work and progress of the Society or the Institute and to hold an enquiry into the affairs thereof and to report thereon, in such manner, as the CG may stipulate. Upon receipt of any such report, CG in consultation with the SG may take action and issue such directions as it may consider necessary in respect of any matters dealt with in the report regarding the Society or the Institute, as the case may be, and the Society is bound to comply with such directions". The next clause says that "if the CG is satisfied that the Society is not functioning properly, then the CG shall have the power to take over the administration and assets of the Institute in consultation with the SG".

For interested readers' information, MHRD has recently appointed a review committee for the IIMs! However, it isn't yet time to get cynical, because the minister has showed that he can listen to reasonable voices from outside as well, and because IIM boards comprise sensible people who are committed to do the right thing, by all stakeholders.

A saddened IIM board member asked a senior business leader, very well respected by every government of the past 30 years, whether it was time for IIM external board members and alumni to give up and "give the government their institutions back", since they say that as "owners", they can exercise overarching management control, bypassing and over ruling the board. His answer is worth reflecting on - he said that it isn't "their" money, but is "our" money that they are holding in trust; we are trustees too and by running away from this unpleasantness, we are not doing our jobs as citizens of our own country.

(The author is an alumna and board member of IIMA. Views are personal.)