Organizational Structure of Corporations
Corporate structure is based on federal and state laws. It maps out the hierarchy of departments, divisions and job descriptions. The three main categories that define corporate structure are directors, officers and shareholders.
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Types
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Publicly-traded corporations are required by the Securities and Exchange Commission (SEC) to release quarterly earnings reports, which can be accessed by the public. Private corporations are not required to do so. Large corporations have several officers, directors and shareholders, whereas one person might serve all three roles at a small corporation.
Directors
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The board of directors map out business strategies and handle legal responsibilities of the corporation, its departments and subsidiaries. The initial board is usually chosen by the original members who set up the company. From then on shareholders usually vote on board members at annual meetings.
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Officers
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The chairman of the board is the top officer elected by the board. The CEO, or chief executive officer, makes day-to-day company decisions, such as signing contracts. Under the CEO, structure varies but the top titles include chief financial officer (CFO) and chief operations officer (COO). A corporation with several divisions usually appoints presidents and vice presidents to run those departments.
Shareholders
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Shareholders are investors who attend annual meetings to vote on directors and certain company decisions. A large corporation might have thousands of shareholders, while a small corporation can sometimes have only one shareholder.
Benefits
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Corporate structure defines chain of command, areas of corporate responsibility and establishes a line of communication between departments and individuals. It also allows for shareholders to potentially earn profits as the company develops.
Misconceptions
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Corporate structure often has been criticized by the independent business community as a roadblock to progress. Innovative corporations such as Apple and Google have shown that new ideas can be fostered by corporations that influence business creativity and efficiency on a broad scale.
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