‘If IIM boards don’t deliver, they may lose part of autonomy’: Bakul Dholakia

AHMEDABAD: The financial and operational autonomy currently enjoyed by the Indian Institutes of Management might not be sustained indefinitely, renowned economist Dr Bakul Dholakia said in an interview with HT. Dr Dholakia, who was director of IIM-Ahmedabad during 2002-2007, spoke about how some of the top IIMs and their governing boards have, over the past six years, veered away from prioritizing the well-being of the institutes and suggested that while the boards currently hold decision-making authority, there’s a possibility that some aspects of their autonomy could be diluted if their performance focus is compromised. Edited excerpts:

Why do you think the government decided to amend the Indian Institute of Management Act, that was enacted in 2017?

The intended purpose of the 2017 IIM Act was to transfer full autonomy to all the 20 IIMs, providing them unrestricted freedom with the purpose to promote institutional excellence. The 2017 Act aimed to allow them to take decisions independently for performance improvement, better governance, and improved operational effectiveness.

In the case of the bigger IIMs, protests and concerns from stakeholders, particularly faculty members, gained significance due to the inefficacy of the existing grievance redressal procedure. As a result, the governance structure within these institutes suffered a breakdown.

Despite being granted full autonomy, faculty members’ complaints against the institute’s director were not appropriately addressed by the board. This lack of responsiveness and the chairman’s blind faith in the director without exercising independent judgment further fueled discontent among the faculty and alumni. Consequently, the mounting pressure and dissatisfaction necessitated the government to act, which may have led to proposed modifications in the IIM Act.

So you are suggesting that the IIMs failed to effectively use the full powers that the 2017 Act gave them and hence they have been curtailed?

Yes. In light of the IIM Act enacted in 2017 to grant full autonomy to the IIMs, there are concerns about the need for amendments as certain institutes have faced challenges in fulfilling their intended objectives. Autonomy and accountability are interlinked, and while the IIM boards and the institute directors enjoy full freedom in their operations, there must be a framework for accountability which should be adopted by the board.

And to ensure accountability, specific parameters should be established to monitor performance on various aspects such as the introduction of new courses, new programmes, global rankings, research work, international reputation, faculty quality, and the institute’s overall standing in the eyes of stakeholders and recruiters.

The IIM Act mandated an independent review of each institute every 3 years, which was to be conducted by eminent independent individuals who could objectively evaluate the institute’s overall performance. The IIM Act specifies the review report must be presented to the board and after its approval should be placed in the public domain. The responsibility for implementing this clause this lies solely with the director and the chairman of the Board of Governors, with no involvement of the government in the process.

However, in the last six years, only IIM-Bangalore has conducted such a review.

Considering the substantial support provided by state governments in terms of free land and generous grants from the Centre in the initial stages, public accountability should be a hallmark of the IIM system. The director should be accountable to the board, and the board should be accountable to the people of India. Dilution of accountability has led to concerns among faculty members, alumni and other stakeholders.

Furthermore, the global rankings of top IIMs have not met the desired standards, prompting concerns about their effectiveness and competitiveness in the global arena. The IIM Bill was introduced with the intention to bolster the institutes’ overall performance and improve their global positioning and standing.

In 2009-10 IIM-Ahmedabad (IIM-A) ranked 11th in the FT (Financial Times) Rankings for the 1-year programme and 41st in the Economist Rankings for the 2-year programme. However, its current rankings have declined, with a position of 51 in FT Rankings and 99 in Economist Rankings. A decade ago, IIM-A was considered the best B-school in Asia, today it is no longer the best even in India – – ISB is at the top in FT Rankings. One wonders whether the IIM boards are discussing the decline in performance of IIMs and looking for ways to improve performance in future. If the board does not monitor various parameters of performance, who else would do it?

Can you cite specific instances where challenges or issues have arisen since the passage of the IIM Act in 2017, potentially impacting the functioning of the premier institutes?

Take for instance, at IIM-Ahmedabad last year, the board decided to change the iconic logo (inspired by the lattice work of the Siddi Saiyyed Mosque in Ahmedabad) based on the director’s proposal last year, which faced opposition from a group of faculty members and alumni.

Earlier in 2020, a proposal to demolish the heritage structures at IIM-A, starting with the iconic dorms designed by Louis Kahn, also sparked discontent among the faculty and alumni, leading them to approach the ministry for intervention. Despite protests and representations, both these proposals seem to have been implemented already.

In both cases, there seemed to be a lack of independent examination from a neutral perspective.

Similarly, at IIM-Calcutta, the appointment of a director from the US led to disagreements with some established faculty members, resulting in the curtailment of her powers by the board and an early exit from the position. The lack of transparency in the BoG’s decision-making process raised concerns among the faculty members. and created avoidable unpleasant situation.

In the case of IIM-Rohtak, the director was re-appointed for a second term as the director, despite objections regarding his educational qualifications. The autonomy granted to the IIMs allowed them to take such decisions which further raises concerns about accountability and transparency.

These instances highlight the need for a more robust and transparent governance framework to ensure that decisions made by the boards of IIMs align with the intended principles of the IIM Act and prioritise the institute’s reputation and welfare.

Will the IIM (Amendment) Bill politicise the appointment of chairman and institute directors?

Some people are concerned that the amendments may lead to political appointments. In my view, this apprehension is entirely misplaced. The new Bill requires prior approval from the Visitor for the appointment of IIM Directors and includes one Visitor-nominated member in the Search-cum-Selection Committee. It also changes the appointment process for the Chairperson of the Board, with the Visitor now nominating one individual. However, historical experience shows that the government has not used its power for making any political appointments in such positions. The objective of these changes seems to be to enhance transparency and neutrality in the selection process. The Visitor’s nominee is expected to be a well-recognized and respected professional capable of providing an independent view.

Currently, the chairmen of many IIMs are corporate leaders, and their influence may impact the selection process. The search committee, consisting of three board members and one external expert, may be swayed by the chairman’s preference for a particular candidate, raising concerns that the director may become the chairman’s nominee. By having a nominee appointed by the Visitor on the search committee, an independent voice which can influence the selection process can be introduced.

These amendments can empower the government to address specifically the appointments in non-performing IIMs while the better-performing ones will be continue to enjoy more autonomy.

The scenario needs to be viewed holistically, considering top IIMs and their inherent biases, leading them to be concerned about accountability. In case of IIM-A, an outgoing director was given a hefty bonus recently, something unprecedented. There is nothing wrong with it but what are the performances parameters used? How did the board evaluate the director’s performance before deciding on performance bonus. This was obviously the case of using financial autonomy enjoyed by the board but the issue is whether use of financial autonomy should be limited to directors only.

Why should it not be used to reward top ranking teachers, researchers and administrators. Equality and fairness in the use of financial autonomy are essential.

Do you think the IIMs face further risk of losing their autonomy in future?

While this is the beginning of the era of amendments in the IIM Act, the IIMs still enjoy full financial and operational autonomy as the boards retain all the decision-making power. However, the significant increase in fees, without transparent cost audit reports, raises concerns among stakeholders. In last 12 years, fees have been hiked from ₹4 lakhs to ₹30 lakhs for a two-year MBA programme. The government has not yet questioned the IIMs’ autonomy in fee-setting, but it comes with the responsibility of ensuring accessibility through need-based scholarships. It is the responsibility of the board to ensure that high meritorious students from the economically backward section of the society get the need-based scholarship so they can pursue their dreams at IIMs. High fees should not compromise on inclusive and equal opportunities provided for all sections of the society.

If the boards don’t deliver, they may end up losing part of their overall autonomy in future. There is a need to view the current state of amendments as a warning signal to ensure that the boards push the frontiers of accountability and focus on bringing about substantial improvements and overall performance of IIMs in future.