January 20, 2006

The (not-so)Innocents Abroad : The case against IIMs

The Globalisation mantra is one that is routinely chanted by most sections of Indian civil society with the possible exception of those of at the xenophobic fringe, both left and right. However in the case of IIM-Bangalore we need to look at the issue from a slightly different perspective.

Comparing an IIM with a Indian multinational like Infosys, L&T, Telco, ONGC or SBI or the IIM brand to something like Kingfisher is erroneous and to understand why let us look at the structure and charter of IIM vis-a-vis these other organisations.

A shareholder owned company, whether listed or otherwise, exists for the creation and enhancement of shareholder wealth. If by expanding abroad, the management feels that it will earn more business and hence enrich its shareholders ... then there is no question that it must do so.

But in the case of IIM, who is the shareholder ( or stakeholder ) ? It is the people of India, the tax-payer, acting through the Government of India who have set up these Institutes. How does this shareholder, or stakeholder, benefit by the IIM setting up a branch in Singapore ? He does NOT and this is the simple reason why both Arjun Singh as well Murali Manohar Joshi is, perhaps for the first time in their respective lives, correct in their opposition to IIMs setting up branches outside India.

But let us analyse why the IIMs are so enthusiastic about setting up branches outside the country. The reason is money, not so much for the Institute but for individual professors. And we cannot really deny them this (ulterior) motive. After all what does an IIT or IIM professor earn ? Something around Rs 500,000 / year and that too at the end of their career. Their students on the other hand routinely earn an identical amount on the day they step out of the institute. Naturally, this huge discount from the market price makes a professor's job extremely unattractive for talented people. [ It is of course a different matter that when talented people seek teaching assignments, even at these abysmal salaries, they are kept out by the old, incompetent incumbents ... but that is a different story ]

Net-net this attempt at opening IIM branches abroad is a ploy by some of the smart and enterprising professors to earn more money. Which is perfectly commendable but falls foul of the basic ground rules ... so is there any way by which the rules can be changed ? Here are two options ..

[a] Let faculty salaries be market driven. Which means that a professor of Computer Science should be paid what his or her counterpart in the IT industry makes and a professor of sociology or history or bengali should expect what a graduate or post graduate in these disciplines currently gets in the industry. By adhering to phony socialistic principles and paying the same money, at "UGC scales" to all teachers we have created a severe distortion in the market that results in smart teachers having to take such dubious and devious ways to get money that they should be getting anyway.

the other option is more radical.

[b] Let us 'privatise' the IIMs and IITs through an IPO. Education is a service business that has enormous potential and there will be no dearth of individuals who would want to invest in the same. The proceeds of the IPO, the money raised from the market, belong to the people of India and should be invested by the Government in more schools and colleges within the country. Given the huge brand value of the IITs/IIMs this money should be fabulous and if used well can create twenty more Institutes in the country.

The existing Institues on the other hand would now be accountable to their new owners, the shareholders, and would have the freedom to pursue whatever course they wish to choose. Should that lead them outside India, so be it, it is none of our business ... just as it is none of our business to ask where Infosys decides to open its next office.


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