Thursday, April 24, 2008

Understanding Corporate Hierarchy

Sole proprietorships, I understand (1 person only. How hard can it be?). Partnerships, I understand (Business/Professional venture. Involves 2 or more persons. Duh!). Corporations, I could never understand. That is, until I read Citibank v. Chua. Very simply, Justice Kapunan delineates the powers and roles of the three major corporate actors, thus:

In the corporate hierarchy, there are three levels of control: (1) the board of directors, which is responsible for corporate policies and the general management of the business affairs of the corporation; (2) the officers, who in theory execute the policies laid down by the board, but in practice often have wide latitude in determining the course of business operations; and (3) the stockholders who have the residual power over fundamental corporate changes, like amendments of the articles of incorporation.

In other words: the board decides on what the corporate policies should be; the officers implement them; and the stockholders own the corporation (and as owners, they get to choose the board members). Ok, got that. Seems simple enough. Just don't ask me to differentiate between a CEO, President, and Chairman of the Board. My understanding has not gone that far.

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