A corporate management structure defines who is accountable for each part of a company, allowing the company to benefit from economies of scale and coordinate its activities. A clothing manufacturer, for example may have separate departments for men’s, women’s and children’s clothes, but a central marketing department. This divisional structure allows departments to focus on their own specific product and market, while sharing information to ensure better coordination. This kind of structure however, can lead to higher costs for employees and work being duplicated such as when purchasing supplies for several divisions.
Corporations are legal entities that have stockholders. They require an appropriate management structure in order to comply with regulations and protect the interests of stockholders. For this reason, most companies have a system of multi-tiers of directors officers, shareholders and directors who oversee the company’s operations.
The top of the pyramid is the chief executive officer (CEO) who is responsible for signing off on contracts and other legally binding decisions for the company. The CEO of a small business may be the sole director or shareholder as well as the chief officer, or the founder. In larger companies, the CEO is appointed by the board.
The board of directors is comprised of elected representatives of stockholders, who determine the overall direction and policy of the company. They choose the CEO, oversee his performance and plan for succession. They also approve major business transactions and activities such as contracting, asset purchase navigating digital transformations with agility and foresight and sales as well as new policies, etc.