A corporate management structure is a way to identify the person responsible for each area of the company, allowing the company to benefit from economies of scale and coordinate its activities. For instance a clothing company may have separate departments for men’s wear, women’s wear and children’s wear but one central marketing department. This divisional structure allows each department to concentrate on its specific product or market, while sharing information in order to improve coordination. This kind of structure could result in higher expenses for employees and more duplicate work like when purchasing items for different divisions.
Corporate entities are legal entities and have stockholders. They require a specific structure for management to conform to rules and protect shareholders’ interests. Most companies have a multi-level system consisting of officers, directors and shareholders that manage the company’s operations.
The top of the pyramid is the chief executive officer (CEO) who is responsible for signing off on contracts and other legally binding decisions on behalf of the company. The CEO of a small company could be the founder and sole director, officer and shareholder, or in larger companies be appointed by the board of directors.
The board of directors is comprised of elected representatives from stockholders, who are responsible for the direction and policies of a company. They select the CEO, supervise his performance, and plan succession. They also approve major business transactions and activities including contracting, asset purchase and sales, new policies, etc.