CAG recommends uniform and fiscally prudent framework for variable pay to IIM directors

FLAGGING SEVERAL procedural and regulatory irregularities in the approval of variable pay of Rs 3.2 crore to IIM Rohtak director Dheeraj Sharma, the Comptroller and Auditor General (CAG) has recommended that the Ministry of Education consider establishing a uniform, transparent and fiscally prudent framework for payment of variable pay to IIM directors.

The CAG in its report said the IIM Act, 2017 entitles the institute’s director to variable pay based on performance objectives specified in the regulations and empowers the board to frame regulations, including those that determine performance objectives for variable pay.

It said the regulations of IIM Rohtak became effective only upon publication in the Official Gazette on October 25, 2021. The regulations require the board to develop and convey a performance matrix for the director, based on which variable pay will be determined.

It also requires the director to recuse himself in all matters involving conflict of interest. The payment of the variable pay to the IIM Rohtak director covered three years — 2018-19, 2019-20 and 2020-21 — despite the regulations coming into effect only in October 2021.

Pointing out several other irregularities, the CAG recommended that IIM Rohtak “ensure that variable pay and similar payments are made strictly in accordance with regulations effective from the date of notification and avoid any retrospective application".

“The Ministry may consider establishing a uniform, transparent and fiscally prudent framework for payment of variable pay to directors across various IIMs," it said. It also said the board may ensure that the director’s recusal is formally recorded in all matters of personal interest and that performance benchmarks, evaluation records and supporting data are properly documented.

"Matters involving financial implications should be taken up only through pre-approved agendas to uphold transparency and integrity," it said. Further, it recommended that the Ministry may consider referring the issue of faculty honoraria and incentives across IIMs to the Coordination Forum under Section 30 of the Act.

The audit report was tabled in the Lok Sabha on August 12. The Indian Express had first reported that the Ministry of Education wrote to IIM Rohtak flagging objections of its Internal Audit Wing (IAW) regarding a variable pay of Rs 3.2 crore paid by the institute to its director, Dheeraj Sharma, for three years fro 2018 to 2021.

As per the audit report, a review of the agendas and minutes of the Board of Governors (BoG) revealed several procedural deficiencies in the approval of variable pay to the director. It says that between October 2018 and December 2020, the Board deliberated on the director’s variable pay on multiple occasions, including during meetings where the matter was not part of the pre-approved agenda and during periods when the board was not constituted as per the IIM Act.

The ministry, in its reply in April 2026, concurred with the audit observation and further highlighted that the payment of variable pay was not supported by regulatory provisions and proper documentation. The Ministry stated that the amount paid on account of variable pay during the period 2018-19 to 2024-25 should be recovered.