Indian Institute of Management (Amendment) Bill, 2023: Explained, pointwise

Introduction

Recently, the Indian Institute of Management (Amendment) Bill, 2023 was introduced in Lok Sabha. The Bill comes six years after the IIM Act, 2017 which declared the 20 IIMs across the country as “institutions of national importance” and conferred them with greater autonomy in both administration and academic functioning. The Bill represents the government’s reconsideration of the autonomy of IIMs.  

How are IIMs governed at present? 

IIMs are registered as societies under the Societies Registration Act, 1860 (or State Societies Registration Acts). Each society has a Memorandum of Association and rules specifying its objectives and the system of governance. 

Currently, IIMs are allowed greater autonomy to be run by its board of governors, with each institute having 19 members including only one representative each from central and state governments.  

The board has the power to take policy decisions related to the administration and working of the institutes. The chairperson of the board of governors is appointed by the board itself.  

The board of governors is the highest decision-making body of each IIM. It has power to appoint search-cum-selection panels for appointments of new directors as well as decide their pay, create posts, establish departments, approve annual budgets and determine fees. 

The Director, who is the Chief Executive Officer of the Institute, is appointed out of the panel of names recommended by a search-cum-selection committee constituted by the Board. The Board chairperson heads the search-cum-selection committee. 

What are the issues with the current governance system? 

Accountability issues: The 2017 Act requires the Board of Governors of the IIMs to commission an independent review of the institutes at least once every three years and place the report in the public domain. But even after 6 years, very few of the 20 IIMs have done so. 

Absence of norms on key matters: The absence of clear norms on key matters, such as the appointment of the dean, has been a matter of concern. 

Governance: There are variations in the level of governance among different IIMs with some lower ranked IIMs being accused of becoming private “fiefdoms” in which the director holds unchecked power. 

What are the key provisions of the Indian Institute of Management (Amendment) Bill, 2023? 

Visitor: The Bill designates the President of India as Visitor of every Institute covered by the Act. 

Appointment of IIM Directors: The Bill mandates the Board of Governors to obtain the prior approval of the Visitor before appointing an Institute Director.  The procedure for selecting the Director will be prescribed by the central government.    

Removal of IIM Directors: The Bill provides that the Board will require prior approval of the Visitor before removing a director.  The Bill also grants the Visitor the authority to terminate the services of the Director, as may be prescribed. 

Appointment of the Chairperson of the Board of Governors: The Bill stipulates that the Chairperson of the Board will be nominated by the Visitor. 

Inquiries against IIMs: The Bill confers the power of inquiry upon the Visitor. Based on the report of such inquiries, the Visitor may issue directions which will be binding on the Institute.  The Board may also recommend such inquiries to the Visitor. 

Dissolution of the Board: The Bill provides that the central government may prescribe the conditions and procedure for dissolving or suspending an Institute’s Board.   

Co-ordination Forum: The Bill provides that the Chairperson of the Co-ordination Forum for all the Institutes will be nominated by the Visitor. Chairpersons of all Institutes will be ex-officio members of the Forum. 

Balancing autonomy and accountability  

The bill has raised concerns among IIMs about direct government control and a potential dilution of their independence. Critics argue that introducing the concept of Visitor in IIMs is a way for the government to exercise direct control. 

But after the 2017 Act, the office of the Director became very powerful, and it has attracted controversy many times. For example, at IIM Calcutta, the majority of faculty signed a petition against the Director’s way of functioning. 

The director became accountable to a Board of Governors in which the two government nominees played a passive role. Individuals who comprise the rest of the Board have no stakes in their respective institutions and no incentive to exercise the necessary oversight.  

Some experts believe that the IIM Act created a situation where there were no meaningful checks and balances on the director. The government claims it aims to fix accountability through the Indian Institute of Management (Amendment) Bill, 2023. 

What is the significance of IIMs? 

The IIMs (IIM Calcutta and IIM Ahmedabad) were established in the early 1960s to train suitable managers for the public sector enterprises being established in pursuance of the Industrial policy.  

Since then, more IIMs have been set up across different cities in India, each contributing to the growth and development of the nation. 

IIMs contribute to the socioeconomic development of India by promoting entrepreneurship, supporting rural development initiatives, and conducting research that addresses societal challenges.  

IIMs have been instrumental in shaping India’s business landscape by producing exceptional business leaders, fostering innovation and entrepreneurship, and facilitating strong industry-academia collaborations. 

What are the challenges IIMs facing? 

Shortage of faculty: 493 teaching positions need to be filled up in the Indian Institutes of Management (IIMs) out of the sanctioned strength of 1566 (December 2022). 

Research output: IIMs have lagged behind leading global business schools in publishing papers in internationally peer-reviewed management journals. The quantity and quality of research carried out in the IIMs has been inadequate. 

Rising course fees: There has been a relentless rise in the fee for the MBA course, which is not related to the costs of the course. 

Conclusion  

The idea that government control is antithetical to the functioning of an educational institution is flawed. Government control has not kept the IITs from creating a brand that is way above that of the IIMs. The IIM brand itself flourished for six decades under government control because the IIMs enjoyed the fullest autonomy in all operational matters. It is the prospect of the brand being undermined by unaccountable boards and directors that should be a matter of concern. No public institution can be exempt from the principle of democratic accountability. And accountability to government and Parliament is preferable to no accountability at all. 

 Sources: The Hindu, Indian Express, PRS