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A corporate management structure defines who is responsible for each area of a company, which allows the company to reap the benefits of economies of scale and coordinate its activities. A clothing manufacturer, for instance, may have separate departments for women’s, men’s and children’s clothing however, it has a central marketing department. This divisional structure allows each department to focus on its specialized product or market, while also sharing information to improve coordination. This type of structure however, may result in higher costs for employees and duplication of efforts like when purchasing supplies for multiple divisions.

Corporations are legal entities that have stockholders and require an established management structure in order to conform to regulations and protect the interests of shareholders. Most companies have a multi-level system consisting of officers, directors and shareholders that oversees the company’s operations.

The top of the pyramid is the chief executive officer (CEO) who is accountable for approving on contracts and other legally binding decisions on behalf of the corporation. The CEO of a small company could be the founder and sole director, officer and shareholder in larger firms they are appointed by the board of directors.

The board of directors consists of the elected representatives of the stockholders who oversee the overall direction and policy of the corporation. They select the CEO, monitor his performance and plan for succession. They also approve important business transactions and activities, such as contracting, asset purchases and sales and policies, as well as any new ones.