A corporate management structure defines who is responsible for various areas of the business, which allows the company to benefit from economies of scale and coordinate its activities. For instance a clothing company may have separate departments for men’s clothing women’s, children’s and men’s wear but one central marketing department. This divisional structure allows different departments to focus on their specialized product and market, while also sharing information to facilitate better coordination. This kind of structure could result in higher employee costs as well as more duplication like when purchasing supplies for different divisions.
Corporations are legal entities with stockholders. They require an appropriate management structure to ensure compliance with regulations and safeguard the interests of stockholders. For this reason, most 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 actions for the company. The CEO of a small company could be the sole founder, director, officer, and shareholder, or in larger corporations they are appointed by the board of directors.
The board of directors consists of elected members from the stockholders who are accountable for the direction and policy of a corporation. They choose and oversee the performance of the CEO and handle succession planning. They also approve major business transactions and activities, like contracts, asset purchases and sale policies, new policies, so on.
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