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 concentrate on its specific product or market, and also share information to improve coordination. This kind of structure however, could result in increased employee costs and duplicated efforts such as when purchasing supplies for several divisions.
Corporations are legal entities with stockholders. They require a specific management structure in order to meet laws and protect shareholders’ interests. This is why the majority of corporations have a multi-tiered system of directors, shareholders and officers that manage the company’s business.
The top of the pyramid is the chief executive officer (CEO) who is responsible for approving on contracts and other legally binding decisions on behalf of the company. The CEO of a small company could be the sole director or shareholder as well as the chief officer, or even the founder. In larger companies the CEO is appointed by the board of directors.
The board of directors is comprised of elected representatives of shareholders who decide on the overall direction and policy of the business. They select and monitor the performance of the CEO and handle succession planning. They also approve major business transactions and activities, such as contracting, asset purchases and sales as real estate and data rooms how digitalization is evolving the market well as new policies, etc.