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When who’s who becomes who’s he at ISB

Back in the nineties a certain Professor Bala Balachandran met up with his long time friend Rajat Gupta, then the managing director of McKinsey, in the Chicago suburb of Winnetka to mobilise finances for a world-class B-school in India. Together the two started International School of Business, ISB for short, in Hyderabad in 2001.

Balachandran, a founding member of ISB, cannot forget how Gupta took it upon himself to assemble a team that read like the who’s who of global business to provide the financial muscle for ISB. And on Gupta’s list was his McKinsey colleague Anil Kumar, who joined the institute’s executive board.

When the news broke earlier this week that Kumar was involved in a multi-million insider-trading fraud perpetuated through Galleon Hedge Fund based out of New York, the industry and academia were shocked and didn’t quite know how to react.

This has obviously not been the best of times for the institute, which was ranked 15th globally in the top B-schools list by Financial Times 2009 and second in Asian business schools. And while every top corporate and academician is rushing to brush these incidents under the carpet, it isn’t that easy to ignore them.

Kumar’s alleged involvement in $20 million scam, along with billionaire Rajarathanam, wasn’t the first blow to ISB. Less than a year ago, the institute’s former dean Mendu Ram Mohan Rao had to leave owing to his reported involvement in the Satyam scam.

Small wonder then, Balachandran, who went on to found the Chennai-based Great Lakes Institute of Management and is now a professor emeritus at Northwestern University in the US, but is no longer associated with ISB, is a disturbed man. “Well, it’s obvious that sometimes, ‘who’s who’ becomes ‘who’s he’, especially when incentives turn into greed and profitability becomes profiteering.”

But he feels that the dent in brand ISB may not be for long. “The two incidents (Rao and Kumar) in a year's time may tarnish the image of leadership, but an academic institution is not a business and this temporary aberration will wither away in less than a year,” he said in an e-mailed response to Financial Chronicle. Balachandran cited the case of Krishna G Palepu, from Harvard Business School who was one of those allegedly involved in the Satyam scandal as an independent director on the company’s board, to prove his point.

Kumar, who operated out of Santa Clara in California, allegedly obtained insider information relating to McKinsey clients. “During August 2008 – September 11, 2008, he profited from trading in AMD stock through Galleon,” said the US Department of Justice charge sheet.

McKinsey was quick to issue their official response: "We were distressed to learn that Kumar has been arrested. We are taking this matter very seriously and are making every effort to understand the facts of this situation as well as we can. Kumar has been placed on an indefinite leave of absence from McKinsey." But the company was equally quick to go off media after that – Rajat Gupta, chairman emeritus of Mc Kinsey, who is also chairman of ISB, was unavailable for comment when Financial Chronicle tried to reach him.

And ISB is no ordinary B-school. It has, in under a decade, managed to hold it own against the big daddies like the S P Jain Institute of Management and Research, Jamnalal Bajaj Institute of Management, Management Development Institute and of course, the IIMs. ISB has academic associations with the likes of Kellogg School of Management, Wharton School and London Business School.

The best in the industry come talent-hunting here – Coca Cola, Pepsi, Nokia, Infosys, Wipro, Microsoft, HSBC, Citibank and Novartis, to name just a few. And the money is more than impressive: while the average salaries offered to graduates in 2009 was $119,022, domestic salaries averaged at Rs 15,05,000 per annum. And this was in the recession year.

As for the executive board, Kumar shared space with names like Reliance-ADAG group chairman Anil Ambani, Godrej group chairman Adi Godrej, Bajaj Auto chairman Rahul Bajaj, ArcelorMittal president Lakshmi Mittal, ITC chairman Yogesh Deveshwar, Infosys chief mentor N R Narayana Murthy and Bharti Enterprises chairman Sunil Bharti Mittal. Ambani, incidentally, was Kumar’s class fellow at Wharton.

“ISB is a prestigious organisation whose brand profile cannot get diluted due to one-off cases like this. Besides, in Kumar’s case, nothing has been proved yet,” said Kiran Mazumdar Shaw, chairperson of Bangalore-based Biocon, who is on the executive board of ISB. Most other members simply did not respond to any communication from Financial Chronicle.

Viren Rasquinha, former hockey international and COO, Olympic Gold Quest, from ISB’s class of 2009, seconds Mazumdar Shaw. “Initially, it was a little shocking to hear about the incident, but it’s a misconception that years of working on reputation can be undone by one stray incident. ISB's brand isn't going to be affected by this incident,” he said.

Ajit Rangnekar, the dean of the institute, who is normally amiable with the media, has resorted to non-committal responses like, “Such things happen. We need to wait and see,” when asked about the issue. He has been trying to underplay the incidents and held a brave, impassive face as ISB hosted two high-profile events in Hyderabad on Thursday – an entrepreneurship conclave organised in association with The Indus Entrepreneurs and a round table on corporate governance with leading PSUs held in their campus.

D S Rao, director of ICFAI Business School, too thinks that this wouldn’t affect ISB’s standing in the academia for too long. “One shouldn’t forget that an institute is separate and a much larger entity than an individual associated with it. Individuals come and go, but good institutes stay on,” he said.

His words seem to find an echo in the industry as well: “ISB is a great institute which has done some great work in the field of business education. Some of the biggest names of corporate India are associated with it. Stray incidents like these would not tarnish its brand value,” said Amit Prasad, chief executive officer and managing director of Satnav Technologies.

Head hunters too are of the opinion that it won’t affect the placements of the students in the institute. “Across the US, it’s common to see CEOs of all top companies on the board of NGOs or educational institutions. But in the face of corporate scams, these institutes are rarely affected. I don’t see any reason why students from ISB will receive any less lucrative offers than what they have been receiving so far,” said B S Murthy, CEO of hiring firm Leadership Capital.

But not everyone is being that kind. “What is most saddening, after all these incidents, is that our entire corporate structure is utterly spineless and what’s more shocking is that people are quite at ease with it. This is indeed alarming and frightening,” said Prof Suman Mukherjee, director of Birla School of Management and J D Birla Institute in Kolkata.

Debashis Chatterjee, director of IIM Kozikode, would like to see the institute being more pro-active: “ISB has to come clean after these events. It is a matter of standing in front of a group of students. You cannot do that when you have tainted individuals on the board. While you can claim to be honest, what is more important is you also have to be perceived to be honest.”

Even Rasquinha feels just as in the case of team sports, the individual is not bigger than the spirit of the sport itself. It is important that B-schools and the corporate world are careful and ethical.

Most agree that the twin episodes have thrown up larger questions of selecting governing board members and their mandatory evaluation at least once every three years. There are suggestions for compilation of centralised database on such scandals and individuals by the ministry of corporate affairs.

Rajat Gupta’s friend, Balachandran cited the practice at Bauer College of Business in Houston, where the chairman and members of the board commenced a practice of self-evaluation. “Such evaluation is prevalent in many corporate houses back in India, like the Godrej group. Adi Godrej should bring in the practice to ISB as well,” he said.

Source: MyDigitalFC.com


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