IIMs to set up centres to help raise funds

The elite Indian Institutes of Management (IIMs) on Friday decided to set up development centres to be run by experts and independent professionals to raise funds from alumni networks and philanthropists. These professionals will work with the two groups to raise funds. At the IIM directors’ meet in Delhi, which was also attended by human resources development (HRD) minister Kapil Sibal​, the London Business School (LBS) was invited to present a case study on how it raises funds.

“The older IIMs can set up centres with an exclusive aim of fostering relationships and raising funds and endowments. The IIMs meet discussed this and (they) are quite positive about the prospect,” said a senior MHRD (Ministry of Human Resource Development) official requesting not to be named as “this is an internal meeting of the IIMs”. The above official said the newer IIMs may opt for setting up a single platform as they don’t have an alumni network like the older ones. “LBS could be the role model for the entire project.”

As Mint reported on Friday, the meeting also took into account a government committee report on the issue which suggested that the IIMs follow a model that identifies prospective fund givers, solicits money from them and keeps them informed about how it is being used.

“Fund-rasing is a long process and we discussed why we have not been able to do it successfully,” IIM-Raipur Director B.S. Sahay said. He said two senior LBS officials present at the meeting spoke about their experience.“LBS is a contemporary B-School to some of our older IIMs, and if they can do it, why cannot we,” Sahay said. The people involved here are professionals and have experience of raising endowments, he added. He said several Indian industrialists have donated generously to foreign B-Schools.

Ratan Tata donated $50 million to Harvard Business School​ (HBS) in 2010. The “gift, the largest from an international donor in the school’s history, will fund a new academic and residential building on the HBS campus in Boston,” the school website says. In the same year, Mahindra and Mahindra’s Vice-Chairman and Managing Director Anand Mahindra donated $10 million in honour of his mother to Harvard University’s Humanities Centre. The Aditya Birla India Centre at LBS was founded by Kumar Mangalam Birla, Chairman of the Aditya Birla Group.

A detailed road map will be prepared by IIMs by Saturday when the meet concludes, Sahay said. Since, the Indian Institutes of Technology (IITs) have managed to accumulate significant donations over the years, some of the directors of the elite engineering schools were also present at the meet.

Source: Mint, January 14, 2012

IIMs look to alumni for raising funds

The country’s premier educational institute, the Indian Institutes of Managements (IIMs), will be seeking funds from its alumni and other stakeholders to expand and create world-class infrastructure. The top management of the IIMs will discuss on Friday,a blueprint on ways to get funds from corporate world and alumni in the next few years. “The IIM directors will be discussing on how to raise funds for the new and old IIMs and engage the alumni,” said Hari S. Bhartia, Chairperson of IIM-Raipur and head of a MHRD committee on raising funds for the IIMs.

The Ministry of Human Resource Development (MHRD) had constituted the committee to help IIMs in building a corpus, so that they can be financially independent and fund proposal for foreign campuses. Bhartia had already recommended setting up of a development office and campaign committees in each IIM for raising fund.

Fund raising campaign by some foreign universities like Yale and Harvard have resulted in generation of over US $ 3 billion. Harvard had received US $50 million donation from the Tata Group in 2010 and earlier Anand Mahindra had donated US $ 10 million.

The Indian Institutes of Technology (IITs) have also generated money in similar ways. Bhartia said the IITs have raised good money and IIMs, especially the older ones, would like to revisit strategy and engage alumni to raise funds. According to IIM officials, the reasons for poor response would also be discussed. To help the IIMs and IITs in their mission, the MHRD has already sought Income Tax exemption on donation of funds or option of non-cash endowments. The ministry had also given full authority to individual IIMs to raise money to pay for its expansion plans.

Source: Hindustan Times, January 13, 2012

IIMs meet to consider ways of raising funds

Directors of the 13 Indian Institutes of Management (IIMs) will meet on Friday to devise a plan to raise funds from philanthropists, industrialists and their alumni in India and abroad to boost their finances, following the example of the Indian Institutes of Technology (IITs) and foreign business schools. Directors and the chairmen of the board of governors of IIMs are holding a workshop in New Delhi that will also be attended by the human resource development (HRD) minister Kapil Sibal, the higher education secretary and other officials of the Ministry of Human Resource Development (MHRD) to devise a strategy to raise funds.

Initially, the IIMs plan to raise Rs. 400-500 crore (Rs. 4-5 billion). This may also be one of the items on the agenda for the IIMs when they go to Europe and America later this year to promote their brand and attract foreign students to bring in more diversity to campuses. The workshop, which some successful IIM alumni may attend, will discuss a MHRD report prepared by a team led by Hari S. Bhartia, co-chairman and managing director of Jubilant Life Sciences Ltd. “Many foreign B-schools are raising funds successfully, IIMs would do well to raise funds too. It will give them a financial edge while planning their expansion inside or outside the country in future,” said a senior MHRD ministry official, who did not want to be named. “They are a growing brand and more funds will serve them well.”

The Bhartia Committee report has suggested that IIMs follow a model that identifies prospective fund givers, solicits money from them and keeps them informed about how it is being used. IIM-Raipur is leading the initiative to hold the workshop, according to the MHRD. The IITs have leveraged their network well and got a good response from corporates and philanthropic funds, said P. Rameshan, Director of IIM-Rohtak. The IIMs jointly represent one brand and even if the new IIMs don’t have an alumni network, progress in raising funds will help all 13, he said.

For a leading business school, managing everything including infrastructure from student fees is very difficult, said Pramath Sinha, the founding dean of Hyderabad-based Indian School of Business​ (ISB). IIMs have some government backing, but funds are always needed for expansion. “You need it to improve infrastructure, give scholarships to students, create chair professors and improve research,” Sinha said. Sinha, who has mentioned about the role of donations and endowment in his new book on ISB, said that this has been a trend among well-known foreign business schools and universities. “In India, IITs are doing it and IIMs trying to do so seems to be a good step.”

For a decade and half, IITs have made significant progress in collecting funds for expansion. In 2000, the Bharti Foundation donated Rs. 20 crore (Rs. 200 million) to IIT-Delhi to start the Bharti School of Telecommunication Technology and Management. IIT-Kharagpur aims to accumulate a $200 million endowment fund by 2020. Industrialist Arjun Malhotra, an alumnus of IIT-Khargapur, donated Rs. 5 crore (Rs. 50 million) last year and has promised to give more. IIT-Bombay has got funds from its alumni network, mainly in the US. The Kanwal Rekhi School of Information Technology, the Shailesh J. Mehta School of Management, the Gaitonde Lecture Hall Complex, the D.S. Foundation Gymkhana and the Victor Menezes Convention Centre have come up with support from alumni, according to its website. The Vinod Gupta​ School of Management at IIT-Kharagpur was initiated by its alumnus Vinod Gupta and named after him.

Source: Mint, January 13, 2012

IIM-Calcutta to tap corporates for funds

The Indian Institute of Management-Calcutta (IIM-C) is planning to tap Indian corporates for funds to complete some of its infrastructural projects following increased intake of students over the last three years. “The student intake has gone up. This year the total intake is around 450 students. Earlier, the intake was around 260 students,” IIM-C Director Shekhar Chaudhuri said.

“We are building around 530,000 sq. ft. of new facility. Half of the project is over. We have built 14 classrooms out of 19 planned. Two new hostels are under construction. The total project outlay is around Rs. 195 crore (Rs. 1.95 billion),” he added. He said the institute has decided to approach corporates for Rs. 50 crore (Rs. 500 million) to complete the infrastructural projects.

Dean and strategic management professor Sougata Ray said: “We have spent from our internal accruals and our corpus. We would like to have some balance in our corpus built over the years and hence the decision to tap the corporates.” Asked about the response of Indian corporates, Chaudhuri said: “We have not approached any corporate till now to gauge their response.”

Institute officials said corporate philanthropy for higher education in India is not popular though some Indian groups have made donations to foreign universities. “Making donations to foreign business schools by Indian groups may also be a brand building strategy,” an official said.

Speaking of finances, Chaudhuri said the institute is self-sufficient in funds generation and has not received any funds from the government since 2003 for day-to-day activities. “Our revenue is around Rs. 100 crore (Rs. 1 billion). We are earning good revenue – around Rs. 30 crore (Rs. 300 million) – from our long duration corporate training program,” Chaudhuri said.

According to Ray, all the IIMs are planning to join hands to bring out a high quality management magazine on the lines of Harvard Business Review. “It may take around a year to come out. The magazine’s name is yet to be finalised. It could be Indian Management Review,” Ray said.

Citing various business school ranking surveys, Ray said IIM-C has moved upwards one slot and is now number two among management institutes in the country. Chaudhuri said the institute has decided focus on research work as a major strategic initiative. “We have increased funding for research and also the stipend for post doctoral students. In the faculty promotion, weightage for research work will be given,” he said.

Meanwhile, like the Chennai Chapter of IIM-C Alumni Association that conducts marketing workshop for the students, the Bangalore chapter of IIM-C Alumni Association has decided to hold an entrepreneur workshop mainly focusing on social entrepreneurs. The first workshop is slated next month and it will be an annual event. There are many IIM-C alumni who have turned social entrepreneurs, Ray said.

Sources: The Hindu, September 24, 2011 & http://www.ndtv.com

>Faculty unhappy with IIM restructuring and governance reforms

>Earlier this month, Indian Institute of Management (IIM)-Calcutta faculty had made public their unhappiness over the governance and restructuring reforms in the IIMs proposed by two committees set up by the Ministry of Human Resource Development (MHRD).

Now, in the latest article published in the Economic & Political Weekly, two IIM Bangalore faculty members have launched a scathing attack on the committee’s reports and IIM Directors. Titled “Governance of IIMs – a critique of the Bhargava Committee Report”, the article penned by Amit Gupta and Ganesh N. Prabhu says the R.C. Bhargava Committee report on new governance structure of the IIMs, co-authored by three current directors, “is a blatantly self-serving report by directors who seek to centralise power and destroy the decentralised governance structure that has made the IIMs institutions of excellence”.

Accusing the committee of operating in isolation and without any consultation with the “only permanent and major stakeholder — the faculty”, the article rips apart the report for “seeking to destroy the decentralised governance that has been the strength of IIMs”.

The committee on a new ‘Governance Structure for IIMs’ has advocated reducing the size of IIM Boards and Society, reconstituting the society to allow alumni, corporates and suitable individuals to become members on payment of a donation ranging from Rs. 5 crore (Rs. 50 million) to Rs. 20 crore (Rs. 200 million), 160 teaching hours per year for faculty, besides annual reviews, redesignating IIM Directors as CEO & President among other proposals.

Rejecting the committee’s arguments on IIM Boards setting up annual targets for faculty and the emphasis on faculty income through executive programmes, the article notes that “the statements in the report relating to faculty are largely negative and show contempt for the faculty”. It further adds that the IIM faculty enjoy substantial autonomy in allocating their time beyond their teaching commitments and this autonomy is “critical to excellence and productivity at IIMs”.

The “overemphasis on role and importance of directors” of IIMs also does not seem to have gone down well. Objecting to proposals to hike the IIM Director’s salary and re-designate them as CEO, the IIM faculty members have argued that while the committee intends to reduce the legitimate role of faculty, it aims to increase the illegitimate role of directors and the board to control the faculty. It is also argued that the new empowered Board and Director as proposed by the committee will only centralise power.

Terming the idea of reviving the IIM Society and allowing donation-based membership as “most absurd”, the critique argues that this will only facilitate a backdoor entry to privatisation where moneyed people will take over the prestigious IIMs and might seek a return on their investment by serving their own interests and even influence student admissions. Warning against allowing IIMs to become “fiefdoms of people with money”, the article emphasises the need to “preserve the democratic and process-oriented of the IIM model with all its frustrations and problems”.

Source: The Indian Express, April 26, 2011

>’A problem with IIMs is they have no real stakeholders’

>Faculty at the Indian Institutes of Management (IIMs) have objected to quite a few of the Bhargava committee recommendations on restructuring these B-schools. Such as the one that the managing society at each IIM should function as an ‘enlightened owner’, wherein corporate entities can become members on payment of Rs. 20 crore (Rs. 200 million), individuals on payment of Rs. 5 crore (Rs. 50 million) and alumni by paying Rs. 3 crore (Rs. 30 million). This, the faculty say, will lead to privatisation of the IIMs. R C Bhargava, Chairman of Maruti Suzuki India and author of this report on new governance structures, tells Kalpana Pathak the teachers haven’t understood. Edited excerpts:

What was the committee’s rationale behind this idea of allowing membership by accepting donation?
It is not a new idea at all. I believe two or three existing IIMs have been allowing this since inception and nobody objected to it so far. The amounts were considerably smaller. All we have done this time is to have increased the amount. If you convert the money that IIMs accepted in, say, the 1960s, it will work out to be a very large figure anyway. So, no new principle is involved.

Why did the committee increase the amount?
Two fundamental reasons. One, to build a corpus for the IIMs. All these years, they have not been able to build any significant one for themselves. Whatever money is available is largely in the form of government grants. The IIMs have not been successful in getting any significant donation from outside parties and using that corpus to do things leading to academic excellence.

Today, the bulk of the money that IIMs generate is through the Management Development Programmes (MDPs) or executive education programmes they conduct. If they did not have these, they would all still be running at a loss or just marginally breaking even.

Every IIM has a scheme that the money earned via MDPs is shared between the faculty member who carries it out and the institution. Of a 100-odd faculty in the IIMs, only 50-60 per cent are able to do MDPs. Some of them are able to earn as much as Rs 60 lakh each year.

Thus, there is a strong interest in carrying out MDPs. However, a result of doing so is limited teaching and research. When the Ajit Balakrishnan committee recommended that about 160 hours of teaching be put in (a year) against around 90 hours at present, which is the case in most IIMs, this was made in the interest of bringing in a healthy development, as you want more MBA teaching and more research to happen. The issue is how to make up for the loss of revenue from the MDPs.

A corpus is a way out and building one is a priority. If we implement the other recommendation of more teaching and more research, it means less MDPs and in turn less income for not only the professors but also for the IIMs. To make up for that income, either you increase the fee or find some other source of money. Else, the budget of IIMs may go for a toss. The corpus income can be used both for making IIMs financially viable and giving extra income to professors who do good work in teaching, research or in conducting MDPs.

Are you implying the IIMs should stop MDPs?
No. But the IIMs have not been set up by the government to carry out MDPs as the main objective and earn money. They are supposed to create managers and leaders. We looked at the kind of MDPs being done. By and large, these are for fairly lower levels of people from the public sector. Higher level management people do not come to the IIMs for MDPs. They are being done for these lower level people as they generate money. A corpus would lead to people getting more time for research and MBAs.

We also thought a corpus would be required as the new IIMs need professors. There is dearth of faculty and if you suddenly add seven new IIMs, where do you get the teaching staff from? One way is to get Indian faculty teaching abroad. They need to be paid. However, they cannot be paid over and above the government’s salary structure fixed through the Pay Commission. So, you can compensate them with board approval through money generated from the corpus. The ministry has recognised this need and approved this method.

Have the professors approached you to clarify the recommendations?
No, none of these professors have spoken to me. I would like to ask them what they mean by privatisation of IIMs. In public sector units, privatisation means reducing government equity to below 50 per cent. This is not happening here. The IIMs will remain Board-managed. The government will remain the promoter and its overall power of control and superintendence will not be diluted.

So, how will some corporate donating money and joining the Society hurt? How will it lead to privatisation? Today, people can give a few lakhs and become members of the Society. Have those IIMs become privatised? If much fewer number pay a few crores, the IIM gets privatised? The logic is hard to follow.

IIMs will always have to seek grants from the government because in the next 20 years, I do not see any of the IIMs having enough resources to fund their capital expenditure. If the faculty members mean the board will suddenly get controlled by the Society, it’s not valid. The Society does not elect the board. You may be a member of the Society but the latter has only one or two members out of 14 on the board.

The issue of privatisation is misconceived and misunderstood. Faculty members are not the governance of an IIM. They certainly do, and should continue to, determine the academic side of the IIM but they are not responsible for governance of the IIMs.

Under the law, the board is supposed to manage and administer an IIM, nobody else. That is the legal position. Subject to whatever powers the government keeps to itself by virtue of its actually being the person who has promoted the IIM and funds the IIMs.

How does alumni being on the board help?
That alumni should be part of the management of the IIMs is something that has been supported by even faculty members. This is how it works with international B-schools. Alumni members take interest in an institution; we talk of people with some sense of ownership and commitment, and who are worried about the reputation of the alma mater.

Getting people who are on the board for three to five years and then leave will serve no purpose. You need people who can care about the institution and have some stake in the institution. A reason why IIMs have not progressed the way they should have is because there are no real stakeholders. Alumni are clear and important stakeholders.

Source: Business Standard, April 15, 2011

>MHRD in sync with IIMs on tax waiver for donations

>If the Ministry of Human Resource Development (MHRD) has its way, individuals and corporations donating to educational institutions may soon be eligible for tax exemptions. In a bid to allow the Indian Institutes of Management (IIMs) to be financially independent, the MHRD will soon propose this to the Ministry of Finance. If accepted, this may be extended to other education institutes too.

“We are evaluating various options which may allow the IIMs to build a corpus. Thus, the donor may be able to avail tax exemption on their donations to institutes. We are also evaluating the option of noncash endowments. For instance, also allow grant of stock or equities and not incur tax on long term capital gains. The entire value of the gift could be exempted from IT as a charitable gift, thereby making it of double benefit to the donor,” a senior MHRD official told Business Standard.

For endowments in cash or in kind (property), the principal amount remains intact and expenditure would be from the interest accrued. Securities donated may have the dual advantages of no capital gains tax and tax exemption as charitable donation. The MHRD had last year asked IIM-Calcutta Chairperson Ajit Balakrishnan to study the system, especially in the context of the education sector and make suggestions, with reference to tax breaks and tax provisions. Balakrishnan told Business Standard that the report was submitted to the MHRD this February.

Last year, Hari S. Bhartia, presented the recommendations of the committee on fund raising by IIMs. His recommendations included setting up of a development office and campaign committees in each IIM. He enumerated possible ways of Fund Raising like Solicitation of Mass Alumni, Campaign Committees, Academic Seminars, lunches and dinners, formation of Board of Counselors, Board of visitors etc. Bhartia committee used case studies from the fund raising campaigns undertaken by Yale University in its US$ 3.5 billion campaign.

MHRD says it is seeking such exemptions on the lines of what the Finance Ministry approved in this Budget. “In the Budget, the Finance Minister enhanced the tax exemption on payments for scientific research to national laboratories, universities and the IITs (Indian Institutes of Technology) — from 175 per cent to 200 per cent. Encouraged by this, we would be seeking exemptions on the same lines,” added the MHRD official.

Indian companies have been seeking tax break from the government to increase donations in terms of endowments to higher education institutions. “Corporations have to give endowments and we support atax break of over 100 per cent towards the same. If you want more research to take place, more donations are required and the government needs to encourage this through tax breaks,” Rajan Mittal, Vice Chairman & Managing Director of Bharati Enterprises had earlier told Business Standard.

At present, donations by companies to higher education institutions overseas is tax exempted as these institutions are run by trusts. However, many of the trusts running education institutions in India are exempt from tax only if they are registered under the charities commissioner or as a Section 25 company under the Income Tax Act.

Also, many companies donate to international institutions abroad as mostly the Indian Income Tax department does not recognise these donations as legitimate ones but as a tax evading exercise. Also, these business houses say they prefer transparency with regard to the use of funds donated by them.

In October 2010, Harvard Business School received a US$ 50 million donation from the Tata Group. This has been the largest gift the school received from an international donor in its 102-year history. The funds will be used to build a new academic and residential building on the schools campus in Boston. Harvard said it hopes to break ground for the building, which will be named Tata Hall, next spring. Prior to this, Anand Mahindra, head of Mahindra Group, gave US$ 10 million to Harvard where he earned his undergraduate and master’s degrees.

Source: Business Standard, April 14, 2011

>IIM-C faculty up in arms over restructuring proposals

>Faculty members at the Indian Institute of Management, Calcutta (IIM-C) have gone on the offensive and published a paper in protest against recommendations by two committee reports for restructuring at the premier B-school. The paper, available on the institute’s website, marks the discontent of the faculty on issues of governance, teaching hours, size of the IIM-C governing board and the fact that the faculty was left out of consultations in coming up with recommendations for change. Among the primary issues professors are opposing are the teaching hours. According to the recommendations by the Bhargava and Balakrishnan committees, the faculty members need to cut on management or executive development programmes (M/EDPs) and increase time allocated to classroom teaching.

“At present, we are doing 6,900 hours of post-graduate programme teaching, which will go up to 8,000 hours with the increased student strength, in a year, in addition to teaching of at least 1,800 hours of doctoral-level courses, to be divided between the 90-odd faculty members. The accusation of limited time to classroom teaching is baseless,” said an IIM professor. According to the professor, apart from the fact that the faculty members were not consulted when arriving at this decision, the recommendation also disregards singular requirements for time that the faculty has to allocate for classroom teaching and comes up with a blanket must-do for all.

The Balakrishnan Committee has proposed a work norm of 160 hours of classroom teaching, a proposal which has been accepted by the Ministry of Human Resource Development (MHRD) and now under fire from the faculty at IIM-C. The fact that they were not consulted in coming up with the recommendations has not gone down well with the faculty members either, who are now complaining over a “unicameral?” method of decision-making. “There is a problem with the communication, given that the faculty was not consulted and opinions were excluded, especially in context of the fact that a majority of these recommendations are to do with them,” said a visiting faculty member at IIM-C on condition of anonymity.

The faculty members are also miffed at this exclusion in light of the fact that they had earlier raised concerns with respect to the previous ‘Report of IIM Review Committee’ published in 2008, which dealt with restructuring as well. “In a bicameral governance, structure decision making is formally divided between the faculty… and the board…We believe that such attempts to exclude the faculty are to silence voices of disagreement and violate the established norms and practices of our governance,” the paper states.

Also under contention is the restructuring of the governing board and the Bhargava Committee recommendation of reducing the overall size of the board from the current 30 to 14. “A reduction in the numbers would make it easier for a small set of individuals to gain control of our institution. A large number as suggested in our current Memorandum of Association reflects a plurality of interests in our functioning and this should be strengthened even further,” the paper states. Under fire again is the issue of ‘enlightened ownership’, which IIM professors term “roundabout privatisation”.

According to this recommendation, board members would be selected by a nominations committee comprising government representative and corporations that made donations. “The Indian Institute of Management-Calcutta is a property of the public and placing this kind of a power in the hands of a corporate is dangerous, in as much as it will lead to privatisation in a roundabout manner,” said a professor from the MIS department. Chairman of the IIM-C board and the Balakrishnan committee, Ajit Balakrishnan, who had earlier shot down any possible chances of IIM privatisation said the recommendations took into account the fact that IIMs were in differing stages of evolution. “Recommendations have kept in place a condition of flexibility depending on faculty talent and inclination. At IIM-C the faculty presented a set of recommendations of flexibility which are under consideration,” he said.

Source: Business Standard, April 6, 2011

>IIM, Calcutta looks to corporates to fund expansion

>The Indian Institute of Management Calcutta (IIM-C) is against privatisation of IIMs but favours corporate contributions to generate funds for setting up new management institutes, a top official said. “Under any circumstances, we are not in favour of privatisation of IIMs. We favour corporate contribution for new IIMs as they may not be in a position to generate resources adequately at least in the initial years,” IIM-C’s Chairman of the board of governors Ajit Balakrishnan said Saturday evening on the sidelines of the institute’s 46th annual convocation.

“It is possible to create a corpus outside the government. But entrepreneurs must be allowed to get full tax benefit of the total contribution,” he said. “Currently, Indian tax system does not allow us to create a corpus,” he added. Balakrishnan said the government should also allow tax reduction for a couple of years at the market value from income if a corporate institution contributed to any educational institute, as was done in the US.

Earlier, speaking on the occasion, IIM-C Director Shekhar Chaudhuri said the institute will soon launch an online general management certificate programme in collaboration with top financial schools. “The IIM-C is providing full support to the new IIM Ranchi, which has been set up six months ago. Most of the courses there are taught by our faculty,” he added.

Source: The Economic Times (Online Edition), April 3, 2011