Simplified: Corporate Structure, Duties and Roles

There was time when all businesses were family owned and run by the family members but when the term investors and shareholders came, with it came the terms called as corporate governance, management team, Board of Directors and Corporate structure.

This means if you are a public or a private limited company and you have investors and share holder (a Part owner of the company), then you no longer are the sole owner but the ownership is divided. Share holder for a private company is max 50 people and for public limited company, it is unlimited. Imagine what will happen when all these shareholders wants to mage the company…. Quit not possible so they hire a Management team who carry on the daily operations and processes.  And this management team cannot report and work under all these shareholders, for which Board of Directors is formed to which the management team is answerable.

Understanding Board Of Directors

The directors of an organization are the persons who are members of its board. For a private limited and a public limited company to form it is mandatory that they have at-least two Directors.

Board of Directors are elected by the shareholders. The role of the board is to monitor the Top Management Team of a corporation, acting as an advocate for stockholders. In essence, the board of directors tries to make sure that shareholders’ interests are well served. The Board has three Broad Categories

• Chairman

A chairman is elected from the board of directors and is responsible for running the board smoothly and effectively. His or her duties typically include maintaining strong communication with the chief executive officer and high-level executives, formulating the company’s business strategy, representing management and the board to the general public and shareholders, and maintaining corporate integrity. Note a Chief Executive Officer (CEO)  may also be a Chairman of the Board

• Inside Directors

Technically speaking as the name indicates these directors are from inside the company i.e., either shareholders or a person from high-level management from within the company. Roles is to approve high-level budgets prepared by upper management, implement and monitor business strategy, and approve core corporate initiatives and projects. These individuals are also referred to as executive directors if they are part of company’s management team.

• Outside Directors

They are not related to to the company i.e, neither employed nor the shareholder of the company and bring unbiased opinions and perspectives to the Board and their roles are same as inside directors. They keep watchful eyes on the inside directors and company’s management and how the company is run. Outside directors are often useful in handling disputes between inside directors, or between shareholders and the board.

Understanding Management Team

This Team is also termed as Top/Senior Management to whom all the managers and employees of the company report or are answerable to. The top management holds executive powers given to them by the Board of Directors and/or shareholders. The role of this team is to take care of the company operations and day-to-day activities. Teams responsibility is to maintain profitability of the company and to safeguard shareholder’s interest. This upper management is hired by the Board of Directors. The consists of –

• Chief Executive Officer (CEO)

Also designated as the company’s president and will be one of the inside directors on the board (if not the chairman). As the top manager, the CEO is responsible for the entire operations of the company and reports directly to the chairman and board of directors. It is the CEO’s responsibility to implement board decisions and initiatives and to maintain the smooth operation of the firm, with the assistance of senior management.

• Chief Operations Officer(COO)

Also referred to as senior vice president, COO works more hands on with the day-to-day activities looking into the sales, marketing, productions and distributions and reports and gives feedback to CEO.

• Chief Finance Officer(CFO)

Also usually called as senior vice president and report to CEO directly, CFO looks into the financial health and integrity of the company. CFO role is to analyze and review financial data, report financial performance, prepare budgets and monitor expenditures and costs. The CFO is responsible to present this information to the board of directors at regular intervals and provide this information to shareholders and regulatory bodies such as the Securities and Exchange Commission (SEC).

• Chief Technology Officer (CTO)

CTO directly reports to CEO and has a role for research and scientific advancement of the company if you are a technology company.