Corporate structure evolved as a result of the growth of companies and their public nature. A public company is one whose ownership is shared among a large number of people who have purchased their power by investing in the company through the obtaining stocks. We have all heard of CEOs, CFOs, presidents and vice presidents, but what is their relationship to each other and to the company that they lead?
Briefly, a corporation is a company or business which has legal rights as an entity separate from its owners. The result of this status is that the liability of the owners is limited and shares are issued as easily transferable stock which allows shareholders certain controls of the company.
Due to the fact that the company is publicly owned a need is created for management and ownership to function separately. This is a two-tiered structure where the board of directors (or governors) is elected by the shareholders and oversees that the company is functioning with the welfare of the shareholders in mind. The second tier is the upper management, responsible for the successful functioning of the company. The upper management is hired by the Board of Directors.
