The Bhargava Committee Report: A Leap Backwards (PART I)

The IIM review makes a case for tightening the government’s tentacles

The report of the IIM Review committee is finally out. If this were a student report it would get an A on “describing the current problems”, a C on all the sections they call “our analysis” – a C and not a D because some of the arguments made in the analysis are brilliantly tautological. As we tell our IIM students, if the analysis gets a D, don’t even bother to check your grade on ‘quality of recommendations’ – even if they make sense by some fluke, please go back and do your analysis – diagnosis again, with more rigour and depth. On integrity and intent, this report gets a straight F. The key thrust of the recommendation is that the boards governing the IIMs be configured in such a way that the government gets more control, and then be given greater decision making powers than they currently have. What is more, the report says, very early on, in a gratingly obsequious manner, “Government is to be congratulated for allowing IIMs absolute academic freedom. Admissions to the PGP programme are purely on merit and both Government and the IIMs are to be congratulated for this”. Why should anyone have to congratulate the Government for not messing around in areas where they have no mandate (refer the MOA), and no expertise?

This report can make a terrific case study or student assignment for a course on corporate or institutional governance – because it makes the need for better governance to drive excellence, as the centre piece of its recommendations, but is conceptually limited in its understanding of what governance is. “Long term excellence of any institution is closely correlated to the quality of governance “, it says. Cannot argue with that at all. But the definition of governance articulated in the report and used to guide all recommendations, is: “Good governance requires that all involved should have clarity of roles and powers to execute the allocated tasks & accountability for the results”. If that is the necessary and sufficient condition for good governance, even the most mismanaged PSUs or the most crony boards have exemplary governance. Everyone knows who has the authority to take which decisions, and there is total clarity around it, as is the clarity for who takes the flak when its results time.

The report shows absolutely no acknowledgement (or understanding?) of the concept that governance is about enabling all stakeholders, large and small, weak and strong, to have a say in terms of what they feel on key decisions affecting the institution and on the values and guiding principles that shape all action; and enabling them to do that through a variety of formal provisions and mechanisms. Even more importantly, the report shows no understanding that governance is about ensuring that no single stakeholder can hijack the institution by using unfair muscle, bullying or pressuring the management to do its bidding, in an “off the board” manner. Given MHRD’s habit and track record of doing just this, any recommendations to improve governance should have included new ways to provide checks and balances to MHRD, and force it to participate in governing the institution through the board.

Governance is about ensuring that the rule of law prevails – like for example, making sure that the MOA between the government and other promoters of the institution is honoured and not repeatedly violated, even if the violator is the government.

This report recommends doing away with the good governance practices that the IIMs already have. Let us examine the current composition of the IIMA board as defined by the MOA, drafted by the likes of Vikram Sarabhai, and contrast it with what the report suggests. The present IIMA board composition allows for a variety of stakeholders to be represented and to have their say and their vote – MHRD, AICTE, people like Magsaysay award winner Elaben Bhatt who provide capitalism with the much needed social conscience with no personal agendas, alumni , members of business and industry, chambers of commerce, and representatives of IIMA society. IIMA Society is the co promoter organization of IIMA, and co signatory to the MOA along with the Government of India and the Government of Gujerat. The IIMA society in turn has its own laid down processes to decide who its nominees on the board should be. The MOA defines what decisions relating to the institution which will be taken how, and what the board composition logic is, and how the board seats get divided up.

In contrast, the recommendations of the Bhargava Committee on board composition promote all forms of crony-ism. The report states that a pan IIM board should be set up “to assist the government”. Since when is a board’s role defined as to assist a promoter stakeholder? It must have 15 members, five of which are government nominees, and the chairman is appointed by the Prime Minister (given how babudom has used this so far, that means one more Government friendly person.) In addition, the secretary of the board will be one of the five government nominees! It then says that the rest can be “highly eminent” individuals, presumably chosen by the Chairman and the secretary, perhaps even members of this committee. Having created this super board whose job is to approve 2 year business plans, vision and mission and give guidelines (perhaps there is not typo here and they did indeed mean guidelines, not guidance) for policy, the committee then turns its attention to emasculating the existing boards of the IIMs

They say that individual boards should be halved to 11 members. The suggested procedure for appointing them is a stroke of diabolical genius, and a total travesty of governance. The secretary MHRD and 3 “independent” professionals selected by him will form a committee which “should make the initial selection to the boards. Thereafter, vacancies to the board would be filled by the boards themselves”. This does not even have a fig leaf to cover its crony-ism. A board whose initial members are handpicked by MHRD will then go on to hand pick its other members. Terrifyingly, the report then states that “The Board of the IIMs should have full powers to manage, including selection of the director, proposing the name of the chairman to the pan IIM board, creating or abolishing posts” etc. It’s like the old Hindu prayer – you are the speaker, you are the listener (“twameva shrota, twameva vakta”). It also states that the memorandum of association of each IIM should be amended to implement the changes proposed.