A corporate management structure determines the person responsible for each aspect of the company, allowing the company to reap the benefits of economies of scale and coordinate its activities. A clothing manufacturer, for example might have separate departments for women’s, men’s and children’s clothing however, it has a central marketing department. This divisional structure enables the departments to focus on their specific product and market, while sharing information to ensure better coordination. This kind of structure however, can result in increased costs for employees and duplication of efforts for example, when purchasing supplies for several divisions.
Corporate entities are legal entities that have stockholders. They require a specific management structure to comply with regulations and to protect the stockholders’ interests. This is why the majority of companies have a multi-tiered structure of directors officers, shareholders and directors who 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 company. A small company’s CEO could be the founder and sole director, officer or shareholder, or in larger corporations, be appointed by the board of directors.
The board of directors is made up of elected representatives of the stockholders who oversee the overall direction and policy of the company. They choose the CEO, oversee his performance, and plan succession. They also approve major business transactions and activities such as contracts, asset purchases and sale new policies, and the list goes on.
