Corporate Management Structure

A corporate management structure defines who is responsible for the various areas of a business, which allows the company to take advantage of economies of scale and coordinate its activities. A clothing manufacturer, for instance, may have separate departments for women’s, men’s and children’s clothes but a central marketing department. This divisional structure allows each department to focus on its specialized product or market, and also share information in order to improve coordination. This type of structure however, can result in increased costs for employees and repetition of tasks like when purchasing supplies for multiple divisions.

Corporations are legal entities that have shareholders. They require a certain management structure to be in compliance with rules and protect stockholders’ interests. For this reason, most companies have a multi-tiered structure of directors, shareholders and officers that oversee the company’s operations.

The CEO is at the top of the pyramid. He is accountable for negotiating contracts and other legally binding actions on behalf of his corporation. The CEO of a small-sized company may be the sole director or shareholder as well as the chief officer, or the founder. In larger organizations the CEO is selected by the board.

The board of directors consists of elected representatives from the shareholders, who are accountable for the direction and policies of a corporation. They choose the CEO, supervise his performance and plan his succession. They also approve major business transactions and activities, such as contracting, asset purchase and sales and policies, as well as any new ones.