A corporate management structure defines the individuals responsible for different areas of the business, which allows the business to take advantage of economies of scale and coordinate their activities. For example a clothing company may have separate departments for men’s clothing women’s, children’s and men’s wear, but only one central marketing department. This divisional structure allows each department to focus on a specific product or market, while also sharing information to enhance coordination. This kind of structure could result in higher costs for employees as well as more duplication in purchasing equipment for different divisions.
Corporations are legal entities that have stockholders. They require a specific structure for management in order to comply with laws and protect the interests of stockholders. This is why the majority of corporations have a multi-tiered system of directors, shareholders and officers that supervise the company’s activities.
The top of the pyramid is the chief executive officer (CEO) who is accountable for approving on contracts and other legally binding decisions for the corporation. The CEO of a small corporation might be the sole director, shareholder, and officer, or even the founder. In larger companies the CEO is chosen by the board of directors.
The board of directors is comprised of the elected representatives of the stockholders who oversee the overall direction and policy of the business. They choose the CEO, monitor his performance, and plan succession. They also approve major business transactions and actions, such as contracts purchase and sale of assets policies, new policies, the list goes on.
