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A corporate management structure identifies who is responsible for various areas of the business, which allows the business to take advantage of economies of scale as well as coordinate activities. A clothing manufacturer, for instance may have separate departments for men’s, women’s and children’s clothes however, they have a common marketing department. This divisional structure allows each department to focus on its specific product or market, while also sharing information to enhance coordination. This type of structure, however, may result in increased costs for employees and duplication of efforts like when purchasing supplies for multiple divisions.
Corporations are legal entities with stockholders. They require an established management structure to ensure compliance with regulations and safeguard the rights of stockholders. Most companies have a multi-level system of officers, directors, and shareholders who oversee 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 may be the sole director, shareholder, and officer, or the founder. In larger organizations the CEO is selected by the board.
The board of directors is made up of the elected representatives of the stockholders, who determine the overall direction and policy of the corporation. They decide and oversee the performance of the CEO and manage succession planning. They also approve major business transactions and actions, such as contracts as well as asset purchases and sales new policies, and others.
