Restoring The Confidence Of The Stakeholders Accounting Essay

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(a) "Managers work in a dynamic environment and must anticipate and adapt to challenges". With regards to the above statement, discuss the role of the new-age manager by taking an example of any Indian organization. (40 Marks)

Business environment is constantly changing and managers must adapt to the changes else survival of the organization will be jeopardized. It is indeed Survival of the fittest. There are various external forces affecting the business besides internal forces being creditors, suppliers, employees, shareholders etc

External forces affecting the organization

The new-age manager has to cope with the following:

Introduction of new tax norms

Change in government policies

Discontinuance of a particular business

Diverse workforce

Natural calamity

Terrorist attack


Unethical practices by some individuals

Scarce resources

Political instability

Changes in technology

The role of the new- age manager in adapting to the dynamic business environment can be explained as with reference to Mahindra Satyam(previously Satyam Computer Services Ltd).

About Mahindra Satyam

Mahindra Satyam s business revolves around information, communications and technology (ICT) .It provides efficient services in business consulting, information technology and communication services. Mahindra Satyam enables the companies across the globe to achieve their corporate objectives and accomplish their tasks successfully via its efficient services.

Mahindra Satyam has a pool of talented IT and consulting professionals across providing various services like business intelligence ,CRM etc It operates in US, Brazil, UK, Canada, India, Egypt, Hungary, China, Singapore, Australia and Malaysia.

Mahindra Satyam is now part of the $11.1 billion Mahindra Group, one of the top 10 business houses based in India headed by Mr. Anand Mahindra. The Mahindra Group is into automotive products, components, logistics ,real estate,farm equipments etc.

The Satyam Computer Systems Fraud

Falsification of Accounts.

Ramalinga Raju inflated the revenues and the profits years altogether .The then auditors of Satyam Computer Systems PWC (Price WaterHouse Coopers)were also under the scanner.

Two PWC partners working on behalf of PWC on Satyam account - S Gopalakrishnan and Talluri Srinivas were also guilty of account falsification.

Raju , inflated the  profits for years with "fictitious" assets and non-existent cash of Rs.5040 crore. On the other hand he also understated the liabilities of Rs.1230 crores.Satyam had overstated debts by about Rs.490 crores.

Additionally certain projects were executed in the name of 7 non-existent companies.

This therefore would show a better financial position of the company in the eyes of the shareholder eventually cheating them. Showing a better picture than what actually is, by inflating the assets is indeed illegal.

Maytas acquisition

In 2008, Satyam attempted to acquire Maytas Infrastructure and Maytas Properties, which were founded by family relations of company founder Ramalinga Raju (Maytas is "Satyam" in the reversed way) for $1.6 billion, despite concerns raised by independent board directors.

Raju's sons owned both the funds.Thus eventually the government had to review the deal. and Satyam' s started losing business.

Buying out Maytas would help Satyam eventually clear the mess created in the Balance Sheet and the reserves of the company could be used to make payment to Maytas but only on paper. This would have helped Satyam to reduce the figures of the Reserves & Surplus of the Satyam which were inflated for years.

Satyam's investors lost about  Rs .3, 400 crores  in the related panic selling. The USD $1.6 billion (Rs. 8,000 crore) acquisition was met with skepticism as Satyam' s shares fell 55% on the NYSE .Satyam' three members of the board of directors had resigned on 29 December 2008.

The after effect was merger of Satyam Computer services Ltd with Tech Mahindra.

On 13th April 2009,via a formal public auction process, a 46% stake in Satyam was purchased by Mahindra & Mahindra owned company Tech Mahindra, as part of its diversification strategy. Effective July 2009, Satyam rebranded its services under the new Mahindra management as "Mahindra Satyam".

On 5 February 2009, the six-member board appointed by the Government of India named A. S. Murthy as the new CEO of the firm with immediate effect.

The role of the new age manager can be seen from the efficient management and insight of the managers of Tech Mahindra and Satyam who were now running Mahindra Satyam.

Variable pay of the employees was re-instated within 6 months (effective October 2009).

The benefits included staff welfare allowance every quarter, performance-based Employee Stock Option Plans for middle and senior level associates and service anniversary programs.

There was re-introduction of staggered cash bonus for selective set of associates at the junior level, along with various rewards and recognition programs in order to acknowledge and encourage excellence at work and enhance the abilities of the employees and increase their job satisfaction.

They resorted to integrated use of technology of Satyam Computers and Tech Mahindra to run Tech Mahindra easily.

The managers undertook effective utilization of man- power for development of both the businesses i.e. the core business of Tech Mahindra being Telecom and of Satyam being its forte in services to the manufacturing industry and SAP implementation.

Re-instatement of falsified accounts by recording the unrecorded liabilities and bringing the assets to their true value and showing the correct figure of the understated liabilities.

The fundamental change that happened in the organization was that 14 layers of management were reduced to seven layers. This means that between CEO to the youngest engineer trainee, there were now seven layers.This was done to promote transparency in the organization.

Tech Mahindras 's finances were used for operations of Mahindra Satyam to re-instate customer confidence.

Mahindra Satyam's operations were expanded to Europe where Tech Mahindra already had a huge presence and also continuing to grow in USA where Satyam had a huge presence.

Tech Mahindra is known for its good corporate governance whose benefit is extended to Mahindra Satyam and the managers adhere to good corporate governance.

Effective use of Tech Mahindra's expertise was used to effectively run in running Mahindra Satyam.

Amalgamation of Mahindra's values with Satyam leading to ethical working environment and commitment.

Main focus was being shifted tothe performance and customer satisfaction.

These steps were taken by the managers to re-instate the working of Satyam.The problem basically highlighted here is the fraud committed by the prvious management. Thus, it was indeed a challenge for the management of Mahindra Satyam to look primarily into four issues first being:

Ethical issues

Operational issues

Financial issues

Restoring the confidence of the stakeholders

Impending law suits

The competency of Mahindra group along with the goodwill it enjoyed helped Mahindra Satyam gradually move along the business line.

Because of Tech Mahindra's large customer base it could achieve a large amount of economies of scale in running Mahindra Satyam.

Thus Mahindra Satyam's managers are using their expertise to overcome these challenges.

These issues have to be met with utmost diligence and thus the dynamic environment continues to test the expertise and patience of the managers.

Thus it is very essential for the managers to have complete knowledge of the organization as well as of the on - going developments in the environment bearing a significant impact on the existence stability and growth of the organization.

Question 1(b) Approach any small size company in your city, contact the HR manager and get the details of the organization structure with names. Then chalk out the main functions of the top management, middle management and supervisory management with respect to that company and discuss their roles and


Organizational structure

It is a framework amidst which an organization determines its line of authority , roles and responsibilities, communication that follows between different levels of management etc.

An organizational structure depends on business of the entity ,its goals and strategies to achieve them.

It also depends on the way in which an organization wishes to delegate its work i.e. departmentalization and work specialization which the company wishes to attain.

Corporate Overview of Mahanagar Gas Ltd.

Mahanagar Gas Limited (MGL) is one of India's leading natural gas distribution companies. Established in 1995, MGL is a joint venture between GAIL (India) Ltd, the BG Group, (U.K.) and the Government of Maharashtra. MGL has to its credit the distinction of pioneering the natural gas distribution network in Mumbai and its neighboring areas. It is into distribution of CNG and PNG to households and industry.

Organizational chart of MGL

List of some Top- Level Managers

Mr. Derek Fisher - Chairman

Mr. S. L. Raina - Director

Mr. Walter A.F. Simpson-Director

Mr. J. Wason - Director

Mr. Jainendar Kumar Jain - Director

Dr. Basudeb Sen - Director

Professor Pankaj Chandra - Director

Mr. Vipin Chandra Chittoda - Managing Director

Mr. William Allan Perrin - Technical Director

Levels of Management

The term "Levels of Management" is a line of demarcation between various managerial positions in an organization.

The number of levels in management increases when the size of the business and work force increases and vice versa.

The level of management determines a chain of command, the amount of authority & status enjoyed by any managerial position. The levels of management can be classified in three broad categories: -

Top level / Administrative level

Middle level / Executory

Low level / Supervisory / Operative / First-line managers

Functions of the different levels of the management.


Laying down companies vision and objectives.

MGL's vision:

Being a leading consumer-friendly gas company

Providing safe, efficient & reliable energy

Contributing significantly for a pollution free environment

MGL's Objectives

Contributing towards the reduction of pollution in and around Mumbai and beyond

Continuously increasing the level of consumer satisfaction and provide quality value added service

To be a leading company in health and safety performance

To expand the area of operations in Mumbai and beyond.

Formulation of overall business policies.

Health and safety policies in consultation with stakeholders.

Environment benefit policies like promoting use of CNG in vehicles.

Policies regarding internal code of conduct.

Designing business strategies in congruence with business


Strategies for raising finance for a new plant or product.

Marketing strategies.

Asset integration strategies.

Entering into new markets.

Example: Recent new markets are Taloja and Navi Mumbai

Decisions regarding capital expenditure .

Example :Import of machinery for setting up the CNG Plant or for laying down of new pipelines.

Pricing Strategies keeping in view the profit of the company.

Example : Deciding at what price the PNG is supplied to households and industry.

Adherence of Corporate Social Responsibility.

Financial support extended for the education and welfare of visually impaired students.

As a national responsibility, MGL has contributed for the relief of victims of National Disasters such as floods, earthquake, etc. 

To provide a source of livelihood to needy women sewing machines were distributed to them.

Supporting Art and Culture for the welfare of community and for propagating Indian Art and Culture

Middle level management

Submitting feasibility reports of projects to top management.

Continuously monitoring the progress of on-going projects.

Application of departmental policies.

Lower Level Management

Execution of strategies and work processes.

Providing feedback to middle-level management and top-level.