Indian School of Business Tries to Deflect Scandals

Ajit Rangnekar, dean of prestigious ISB, has been working hard to play down the school's associations with recent business scandals

By Mehul Srivastava

At the Hyderabad-based Indian School of Business, one of the most prestigious B-schools in the country, 579 supercompetitive students spend much of their class time locked in debate. They would do well to practice with their dean, Ajit Rangnekar, who has spent much of the year sparring with opinionated journalists and rancorous alumni about how often ISB—which until this year was known in the West for its alliances with top business schools such as Wharton, Kellogg, and London Business School—has found itself in the news for all the wrong reasons.

The year began with ISB caught up in the Satyam scandal. On Jan. 8, then-Dean Mendu Mohan Rao resigned from his position after Satyam Computer Services (SAY), in which he was an independent director, had to be rescued from collapse by the Indian government when its CEO, Ramalingam Raju, admitted to overinflating revenues by more than a billion dollars. Rao was not charged with any wrongdoing, and was unreachable for comment this week. However, he resigned after a media outcry following news he had chaired a Satyam board meeting that approved the purchase of companies owned by Raju's family members at highly inflated prices.

Just as that uproar died down, another member of ISB's board resigned. Anil Kumar, an ISB director and a consultant at McKinsey, stepped down as he faced criminal charges in the U.S. over the Galleon insider-trading scandal. Federal prosecutors allege that he leaked insider information on Sunnyvale (Calif.)-based chipmaker AMD (AMD). Kumar denied the allegations when they were first made on Oct. 16; his New York-based lawyers did not return calls made by BusinessWeek seeking comment.

Rajat Gupta Connection

And then, on Oct. 26, India's Economic Times reported that Rajat Gupta, the former head of McKinsey, and one of the founders of ISB and the chairman of its executive board, is being investigated by the Reserve Bank of India for being part of a group of investors "who acted in concert" when they acquired stakes in a small southern Indian bank. Neither Gupta nor the RBI would comment when questioned by BusinessWeek. Gupta has not been charged with any wrongdoing.

It's clear that questions about these headlines exasperate Rangnekar, who was promoted to dean in January to replace Rao. "Firstly, none of these people are employees, graduates, or even faculty at the school," he says, pointing out that other than Raju, the Satyam CEO who wrote a confession, none of the other scandals has resulted in convictions. "The school doesn't even appoint directors, for God's sake." At ISB, the executive board consists mostly of the original group of business and political leaders who got together to form the school in the late 1990s.

Instead, says Rangnekar, ISB should be judged by how well it prepares students for the rigors of the C-suite job, the way it attracts faculty members of international renown, and the fact that it is one of the few Asian business schools to rank so high in international surveys of MBA programs.

That's probably a good angle to take, says Sunit Arora, the business editor of Indian newsweekly Outlook, which regularly ranks business schools.

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