Higher education could use corporate touch

Business Case | Premchand Palety

Many prospective MBA students may not be aware of one aspect of the Indian School of Business (ISB): after completing the school’s flagship one-year programme, which would cost them more than Rs16 lakh, they will not get an MBA degree or its equivalent postgraduate diploma in management (PGDM, which is now synonymous with MBA).

The law of the land allows only a society or trust to give a professional degree. ISB is neither. It is registered under the Companies Act (though under section 25, which prohibits it from making a profit). Perhaps to keep itself on the right side of the law, ISB chose to change the nomenclature of its one-year programme, which is a certificate programme. It gives a certificate to the graduates, not a degree. So technically, an ISB graduate can’t be called an MBA.

Curious to know why ISB is still on the “hit list” of the All India Council for Technical Education (AICTE), I spoke to a senior official of the board recently. The official claimed to have as evidence, advertisements by ISB, which clearly state that it is running a postgraduate degree programme. This, he said, was clear contempt of law on ISB’s part as it is registered under the Companies Act.

If institutes such as ISB are playing hide-and-seek with the law, the law needs to be changed. The government will do a great service to the cause of higher education if corporate bodies are also allowed to run educational institutions that give professional degrees.

It’s sheer hypocrisy to assume that people running educational institutions should be there to work for charity and not to make money. In fact, many trusts and societies running educational institutions are known to indulge in corrupt practices. Black money is being generated by way of “donations” taken from students during admissions.

The main promoter forms different organizations that bill the society/trust for various services such as maintenance of infrastructure. The secretive nature of the entire operation is the main cause of close relatives or cronies of the main promoter being given key positions in an institute instead of professionals.

Some societies that have high-profile dignitaries on their governing bodies have even devised ways and means to beat the system. A prominent business school located in south Delhi, and which was “taken over” by a builder a few years ago, is a case in point. The governing board was illegally converted from trust to society in the 1990s.

It has a former chief election commissioner, a former director of the Central Bureau of Investigation and a former chairman of the Oil and Natural Gas Corp. as members of its governing body. All of them are paid monthly remuneration of Rs50,000 plus other perks in spite of the fact that society members are not allowed to take a salary if they don’t hold a job in the organization.

The builder has also promoted a junior faculty member known for her “close friendship” with him as the director of the institute so that he can easily manipulate the system.

This B-school is known for back-door admissions. Last year, AICTE asked the institute to submit details of students admitted. Though officially the cut-off common admission test (CAT) percentile was declared more than 90, it was found that students with low CAT scores and even students who had not appeared for CAT were admitted. As expected, no action was taken against the business school.

While there are several such examples, people who want to make money in an honest manner have to face entry barriers. The other day, I got a call from a big equity fund official. He wanted to know if the firm could invest in the higher education sector. The short answer is that they cannot, as existing laws bar profits from education.

Imagine the amount of funding this sector will receive if this were allowed. It will lead to better scalability for good institutes because of access to various funding options. Such institutes will also have good governance as they will be answerable to shareholders. They will also be more responsive to stakeholders as they will be guided by a corporate philosophy of stakeholder satisfaction for maximizing returns on investment.

Students will have more choices and competition will force schools to produce better quality students and offer programmes that are good “value for money”. This will, to an extent, resolve the shortage of good institutes in the education sector.

The historical developments in the last two decades, especially in Communist regimes, should bring in a paradigm shift for our policymakers while making laws. To work for materialistic incentives is more basic to human nature than to work for philanthropy. The challenge for our lawmakers should be to leverage this basic human trait for the larger good of society.