Typical Corporate Organizational Structure
When a company is organized as a corporation, the ownership and control is distributed to joint owners called shareholders. The shareholders vote on various issues, including the composition of the board of directors, who in turn appoint executives, who manage the day-to-day operations of the firm. Various echelons of authority below executive also exist and have varying responsibilities.
Other People Are Reading
-
Hierarchy and Democracy
-
Most of a corporation's structure is hierarchical in nature. Labor is overseen by supervisors who in turn are directed by managers. Typically, each level reports to and is appointed by the level above it. Executives appoint managers. Executives are appointed or elected by the board of directors, depending on the method specified in the articles of incorporation. The members of the board are elected by the shareholders and serve terms of a specified length (again determined by the articles of incorporation). So, at the lower levels, corporations are hierarchical and at the higher levels, democratic.
Tall vs. Flat
-
Organizations are sometimes depicted graphically as a pyramid. The staff, which is both most numerous and holds the least amount of autonomy and authority, represents the base of the pyramid. Middle management is above and less numerous, while each ascending level represents greater degrees of autonomy and authority and the correspondingly fewer employees who have it. The peak of the pyramid symbolizes the chief executive officer, who is ultimately responsible for all the day-to-day operations of the firm. While nearly all corporations can be represented by this model, some feature many echelons of authority while others only a few. Proponents of "flat" corporate topology champion the empowerment of labor and the innovative problem solving that can come from giving everyone a voice.
-
The CEO
-
Responsibility for the performance if the firm is vested more in the chief executive officer than in any other single person. In naive terminology, he is the "boss" and usually has the power to enact any policy he wants, within reason. CEOs are also compensated commensurate to the size of the company and are typically the most highly paid member of the organization. However, with power and freedom come great responsibility. The compensation of CEOs often comes in the form of stock options or grants of company stock. If company profits grow, the CEO is rewarded commensurately. If profits falter, the CEO will suffer financially. Under-performing CEOs are also dismissed by the board of directors.
Lesser Executives
-
The CEO cannot attend to all the business of the firm herself. While she holds responsibility for the firm's performance, she delegates many of the duties to her juniors. The two most common methods of dividing the responsibilities of junior executives are by location and by function. When allocated according to function, executives hold titles like chief information officer, chief financial officer or vice president of marketing. Divisions by location may yield titles like regional vice president or plant manager. The two methods are not mutually exclusive and some firms use both.
Board of Directors
-
The board of directors elects the CEO and, depending on the articles of incorporation, may elect junior executives as well (otherwise the CEO will hire them). While the board installs and dismisses executives, it does not usually involve itself in the daily affairs of the firm. The board makes large-scale decisions like considering mergers, acquisitions, strategic alliances, and issue or buybacks of common stock or bonds. The board itself is headed by the president or chairperson of the board. Often the founder of the company, the president is often protected by a provision in the articles of incorporation that prevents him from being deposed. Otherwise, board members who are seen as under-performing are dismissed by a vote of the shareholders. Because all members of the organization are replaceable, corporations can persist beyond the natural life of their employees, executives and directors. Some have been in continuous operation for centuries.
-
References
- Photo Credit arm-chairs at a table image by S from Fotolia.com
