The Corporate Process

Corporate Process

There are a number of key players in the corporate process. The director of a corporation is a person whose role is to act as an agent of the shareholders. The directors provide the oversight of corporate management and ensure that the needs of the shareholders are being met. Within this role, there are a number of key tasks that the directors must perform. Directors are responsible for choosing the CEO (who in turn selects the other executives). The choice of CEO sets the tone for the direction of the company, and can be a critical element in corporate strategy.

The directors also work in sub-groups in order to attain other elements of governance. Many current boards include committees on executive compensation. The board negotiates the compensation package with the CEO and in recent years this has become an important component of the role of the directors. The directors are also responsible now for the integrity of the financial statements. Although under Sarbanes-Oxley it is the CEO and CFO who must sign the financial statements, shareholder groups are more insistent since the passing of SOX that the directors have a sub-group with sufficient accounting knowledge to verify the statements as well as their standard of internal control has been raised by the law. In many cases, the board must approve the annual budget of the company as part of the accountability to shareholders.

The officers of the corporation are the functional managers. While duties may vary, the Chief Executive Officer is hired by the board and must hire the other officers. The other officers in turn are responsible for their departments. A typical company might have officers for investment, operations, finance and technology. These officers are responsible for the functioning of the company. They set the direction of strategy and undertake the implementation of strategy. The officers also act as agents of the shareholders (eNotes, 2010), but unlike the board are not held directly responsible by the shareholders. They are held responsible by the CEO.

The shareholders of the corporate are the legal owners of the corporation. In most cases, they do not actively control the corporation, but rather are responsible for appointing the board to oversee the corporation on their behalf. The shareholders as owners have some entitlement to profits from the company, but the terms of that profit distribution are generally decided by management when it announces its dividends. The shareholders do have a small handful of legal responsibilities. They elect the board. They also vote to approve the auditors. Occasionally, such as when Arthur Andersen collapsed, shareholders may be compelled to vote outside of normal shareholder meetings. The shareholders also have certain rights of ownership such as the rights to the proceeds from the dissolution of a company, should there be any.