July 18, 2011

Identifying Roles in a Corporate Organizational Structure

Businesses are focused on generating money for investors. There will always be some type of management hierarchy in order to maintain control. Government and nonprofitorganizations will use a similar control hierarchy; however, the titles will be different. For government and nonprofit organizations, the term mission objectives would be substituted for the term revenue.
Figure 1 illustrates a typical business corporation.

Figure 1: A typical business organizational chart
Let's start at the top of the diagram and work our way down:
Board of Directors The board of directors usually comprises key investors and appointed advisers. These individuals have placed their own money at stake in the hopes of generating a better return than the bank would pay on deposits. Board members are rarely—usually never—involved in day-to-day operations. Some members may be retired executives or run their own successful businesses. Their job is to advise the CEO and the CFO. Most organizations indemnify board members from liability; however, government prosecutors will pursue board members if needed.
Audit and Oversight Committee The members of the board will have a committee comprising directors outside of the normal business operations. Executives from inside the organization can come to the committee for guidance and assistance in solving problems. This committee has full authority over all the officers and executives. They can hire or fire any executive. Each audit committee has full authority with a charter to hire both internal and external auditors. Auditors are expected to discuss their work with the audit committee. An auditor has the right to meet in private to discuss issues with the audit committee once a year without the business executives present. If auditors discover certain matters that stockholders should be informed about, the auditor shall first bring it to the attention of the audit committee. Regulations such as SOX require that all significant weaknesses be disclosed to the audit committee every 90 days.
Chief Executive Officer (CEO) The CEO is primarily focused on generating revenue for the organization. The CEO's role is to set the direction and strategy for the organization to follow. The CEO's job is to find out how to attract buyers while increasing the company's profits. As a company officer, the CEO is liable to government prosecutors. Corporate officers have signing authority to bind the organization.
Chief Operating Officer (COO) The COO is dedicated to increasing the revenue generated by the business. This is a delegate in charge of making decisions on behalf of the CEO with assistance from the CFO. COOs are often found in larger organizations. As a company officer, the COO is liable to government prosecutors.
Chief Financial Officer (CFO) The CFO is in charge of controls over capital and other areas, including financial accounting, human resources, and IS. Subordinates such as the CIO usually report to the CFO. As a company officer, the CFO is liable to government prosecutors.
Chief Information Officer (CIO) The CIO is subordinate to the CFO. The CFO is still considered the primary person responsible for internal control. A CIO might not be a true company officer, and this title may bear more honor than actual authority, depending on the organization. An exception may be a CIO in corporate headquarters. The CIO has mixed liability, depending on the issue and the CIO's actual position in the organization.
President/General Manager The president, sometimes referred to as the general manager, is the head of a business unit or division. As a company officer, the president/general manager is usually liable to government prosecutors. Regulations such as SOX encourage management to require all divisional presidents and controllers to sign integrity statements in an effort to increase divisional officer liability.
Vice President (VP) The vice president is the second level of officer in a business unit or division. As a company officer, the vice president is usually liable to government prosecutors.
Department Directors (Line Management Position) Typically directors are upper-level managers supervising department managers and do not have company officer authority. In large organizations, you may encounter a major-level director and minor-level director.
Managers and Staff Workers Managers are responsible for providing daily supervision and guidance to staff members. Staff members may be employees or contractors working in the staff role. Managers and staff members are seldom held responsible for the actions of a company unless they knowingly participate in criminal activity.

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