A corporate management structure identifies who is responsible for various areas of a company, which allows the company to profit from economies of scale and coordinate its activities. A clothing manufacturer, for instance has separate departments for men’s, women’s and children’s clothes however, it has a central marketing department. This divisional structure allows each department to concentrate on a specific product or market, and also share information in order to improve coordination. This kind of structure could result in higher costs for employees and more duplication like when purchasing equipment for different divisions.
Corporations are legal entities with stockholders. They require an appropriate management structure in order to conform to regulations and protect the interests of shareholders. Most corporations have a multilevel system of officers, directors, and shareholders who oversee the operation of the company.
The CEO is at the top of the pyramid. He is responsible for signing contracts and other legally binding acts on behalf of his company. The CEO of a small-sized company could be the sole director, shareholder, and officer, or even the founder. In larger corporations the CEO is chosen by the board of directors.
The board of directors is comprised of elected representatives from stockholders who are accountable for the direction and policies of a business. They select the CEO, monitor his performance and plan his succession. They also approve major business transactions and activities, such as contracts purchase and sale of assets new policies, and the list goes on.