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MCS Assignment 2: D. Srirama Samdhathri 2013PGPUAE012

The document discusses the role of top management and the management control systems (MCS) department in administering the MCS at ITC Limited, an Indian conglomerate. Top management establishes the organizational structure, provides strategic direction and oversight, and ensures shareholder value and strategic goals are met. The MCS department aids strategic supervision on behalf of shareholders, focuses on strategic rather than executive management, and helps with incentives, budgeting, and communication across business units. Business units are responsible for day-to-day operations under this framework.

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67 views

MCS Assignment 2: D. Srirama Samdhathri 2013PGPUAE012

The document discusses the role of top management and the management control systems (MCS) department in administering the MCS at ITC Limited, an Indian conglomerate. Top management establishes the organizational structure, provides strategic direction and oversight, and ensures shareholder value and strategic goals are met. The MCS department aids strategic supervision on behalf of shareholders, focuses on strategic rather than executive management, and helps with incentives, budgeting, and communication across business units. Business units are responsible for day-to-day operations under this framework.

Uploaded by

samdhathri
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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MCS Assignment 2

D. Srirama Samdhathri
2013PGPUAE012

MCS ASSIGNMENT 2

MCS Assignment 2
The Role of Top Management in Administering the
Management Control System
1. Organisation structure: Structure is the prime responsibility of the top management as it defines
the communication among the committees in the organization. (see Exhibit 1). The management
control system is placed below the Audit committee, Compensation Committee, Nominations
Committee and the investor services committee.
2. Control: The top management provides direction and exercises appropriate control to make sure
that the stakeholders values are fulfilled by the way company is managed.
3. Shareholder value: To protect and enhance shareholder value through strategic supervision of ITC
and its wholly owned subsidiaries
4. Strategic planning: ITC businesses use vertical strategic plans i.e. the different business units (See
Exhibit 2) prepare strategic plans, which are reviewed by the senior management. Strategic
planning systems in ITC are usually both horizontal and vertical. The horizontal processes involve
the preparation of a plan by an executive corresponding to their respective business unit, along
with the synergistic inputs from the other business units of the organization. The managers of
these individual business units identify the various linkages to other business units so that they can
synergize their operations. These interdependent units also require joint strategic plans.
5. Develop strategic goals for the company and seek accountability for the fulfilment of the goals
designed.
6. Exercise appropriate control over the responsibility centres to ensure that the company functions
in such a way that it fulfils all the aspirations of stakeholders and the expectations of the
society(through CSR).
7. Below are the roles and responsibilities of the top management in administering the management
control systems in ITC.
Chairman:
The Chairman of ITC is the Chief Executive of the Company.
To provide leadership to the Board and the CMC for and to make sure that the Company
goals are in accordance with the charter approved by the Board.
To ensure proper working of the Board and the CMC, so that all relevant issues are on the
agenda.
To maintain balance of membership of the Board, subject to Board and Shareholder
approvals.
Executive Director :
To contribute to the strategic management of the Companys businesses within the
framework approved by the board.
To assume overall responsibility for the strategic management which include governance
processes, effective management decisions for business units reporting to them.As an

MCS ASSIGNMENT 2

Executive Director accountable to the Board for a wholly owned subsidiary or its wholly
owned subsidiary,
To act as the custodian of ITCs interests and to assume responsibility for the companys
governance according to the framework approved by the Board.
Non-Executive Director Non-Executive Directors, including Independent Directors:
To impart balance to the Board processes by bringing in independent viewpoints on
issues/problems related to the strategy, performance, resources, standards of conduct, etc.
of the company.
Divisional / SBU Chief Executive Officer (CEO) The Divisional / SBU CEO:
Day-to-day operations.

MCS ASSIGNMENT 2

The Role of Management Control Systems Department in


Administering the Management Control System.

1. CMCs primary role is the strategic management of the companys businesses,


within the framework approved by the board. The CMC operates under the
strategic supervision and control of the Board.
2. Incentives and compensation: In ITC, bonus is usually formula- based i.e. the
bonus is tied to the performance of the particular unit rather than the profitability
of the whole firm.
3. Budgeting: In a single business firm, the CEO can control the budgeting
operations through informal methods or by involving in the business units
personally. But in ITC, it is not possible to rely on informal interpersonal
relationships, and the chief executive officer may not be able to control all the
budgeting activities in all the businesses.Hence the management control systems
help the CEO understand the budgeting decisions taken by the business unit
managers, who have greater influence in developing their product and market
environments.
4. Strategic supervision (on behalf of the shareholders): As the MCS department is
free from involvement in the task of executive management of the Company, the
evaluation of the business units can be conducted by the Board with objectivity,
thereby sharpening accountability of management

MCS ASSIGNMENT 2

5. The MCS department is free of day-to-day tasks of executive management, and


hence remains focused on strategic management.
6. Executive management of a Division or Business, free from collective strategic
responsibilities for ITC as a whole, focuses on enhancing the quality, efficiency
and effectiveness of the business.
7. Management communication system: ITCs management communication system
follows across the groups(or business units) so that both intra-unit and inter-unit
information asymmetry is avoided. This system is very robust and has a clear cut
defined communication strategy.

MCS ASSIGNMENT 2

Board of directors
Audit Committee

Compensation Committee

Nominations Committee

Investor services
Committee

Corporate management Committee


Divisional/Strategic Business Unit (SBU)
Management Committees, each headed by a
Divisional/SBU Chief Executive

Corporate Functions, each headed by a HOD

Divisional/Strategic Business Unit (SBU)


Management Committees, each headed by a
Divisional/SBU Chief Executive

Corporate Functions include:


Planning and Treasury, Accounting, Legal,
Secretarial, EHS, Human Resources,
Communications, Internal Audit and Information
Technology

Exhibit 1

Exhibit 2

MCS ASSIGNMENT 2

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