A corporate management structure defines who is responsible for different areas of a business which allows the company to take advantage of economies of scale and coordinate its activities. For example an apparel manufacturer might have separate departments for men’s clothing women’s wear, children’s wear and men’s wear, but a central marketing department. This divisional structure allows the departments to focus on their specialized product and market, while sharing information for better coordination. This kind of structure could result in higher expenses for employees as well as more duplication for purchasing supplies for different divisions.
Corporate entities are legal entities and have stockholders. They require a certain structure for management to conform to regulations and to protect the stockholders’ interests. To this end, many companies have a multi-tiered structure of directors officers, shareholders and directors that supervise the company’s activities.
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 corporation. A small business’s CEO may be the sole founder and chief director, officer, or shareholder or in larger corporations be appointed by the board of directors.
The board of directors is comprised of elected representatives of the stockholders who oversee the overall direction and policy of the business. They choose the CEO, oversee his performance and plan succession. They also approve major business transactions and activities such as contracts acquisitions and sales of assets new policies, and others.