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Q: Corporate Hierarchy/Governance ( Answered 5 out of 5 stars,   0 Comments )
Subject: Corporate Hierarchy/Governance
Category: Business and Money
Asked by: ooogleemooglee-ga
List Price: $5.00
Posted: 17 Oct 2002 08:30 PDT
Expires: 16 Nov 2002 07:30 PST
Question ID: 77749
I am confused about corporate hierarchy/governance. What is the role of the
President? What is the difference between a President and Chairman? Is
the President just another name for CEO? I know the C-titles have to
do with leading/operating a company, internal employees. Chairman
deals with head of the corporate board, and usually the CEO or at
least an employee of the company. I know board members can be
employees of the company, but is not required. So are board members
another name for board of directors??
Subject: Re: Corporate Hierarchy/Governance
Answered By: weisstho-ga on 17 Oct 2002 19:39 PDT
Rated:5 out of 5 stars
Hello ooogleemooglee-ga !!  

(Love your name!)

I have watched your question hang around, and was hoping that it would
be available when I had a few minutes, and lucky me, it was!

I have spent 30 years now in various corporate environments and have
seen practically every combination and permutation of corporate
structure. The one rule that I have learned is that there is no one
rule concerning titles relating to specific job functions.  But
nevertheless, let’s try to make some sense out of all of this.

1. Yes, members of a board of directors are sometimes informally
called “board members.”

2. “The governing body of a corporation elected by the shareholders is
called a board of directors.”  A board is usually composed of both
senior officers of the corporation (referred to commonly as “inside
directors”, and people who are not employed by the corporation, but
who serve on the board, for which they receive a fee, and these folks
are called “outside directors.”

3. The board is empowered to elect and/or appoint officers and agents
to act on behalf of the corporation. They also declare dividends, and
act on other major matters involving the corporation. They pay
attention to the “big picture” corporate policy issues, and (usually)
leave the day-to-day management issues to the officers of the

4. The Board of Directors is almost always led by its Chairman – the
Chairman of the Board of Directors. Since the Board is charged with
executing “executive functions” the Chairman is, usually the CEO or
Chief Executive Officer. CEO’s may or may not have day-to-day
responsibility at the corporation, although these days you would
typically find the CEO is an officer of the company, maintains an
office in the corporate headquarters, and many times (though not
always) has “come up through the ranks” and has been a manager ‡ vice
president ‡ executive vice president ‡ president ‡ CEO.  Many people
analogize the President of the United States to a CEO. It is the top
job, but the day to day function is to set policy, make sure board
policy is being implemented and managed appropriately, and to
coordinate the activities of the policy setting Board with the day
–to-day operations of the company.   This is particularly true in
conglomerates, where the corporation owns a number of different
businesses, perhaps in different parts of the world, each perhaps with
its own president – all reporting to the CEO.

5. The President of a corporation is typically the Chief Operating
Officer – All of the operations report up through junior officers
(vice presidents) to the President. There will be vice presidents for
various divisions of the company, or for various important functions;
for example, there may be vice presidents for finance, marketing,
accounting (many times called a controller or comptroller),
information services, public relations, corporate affairs (also called
a secretary), law, and the various operating divisions.  There may be
a number of flavors of vice president:  Assistant VP, VP, Senior VP,
Executive VP – I’ve even seen Sr. Exec. VP.

6. The president’s role is to manage and be responsible for the
day-to-day affairs of the company.  The board sets policy, the
president executes that policy and reports back to the board, and the
board then reports to the shareholders, or owners, of the company.

7. The issue of inside directors versus outside directors is an
interesting one. Some companies believe that inside directors, at the
risk of losing their jobs if too outspoken, will not challenge their
superiors or think too far outside the box. Those companies would
therefore severely limit inside directors, perhaps only to the
president. All the other directors are outsiders, who are seen to be
better able to create and debate policy initiatives.

Other companies do the opposite – they are very much in favor of
stacking the board with inside directors, typically justifying this
structure with the theory that insiders know the company
extraordinarily well, are totally vested in the affairs and interests
of the companies, and are best able to determine the policies that
would best drive the company profitably into the future.

As an aside, I have served a number of years on various boards of
corporations, and have felt that boards comprising largely outside
directors were the most effective.  I have seen a lot of senior
corporate officers sitting on boards afraid to state their opinion
when they know their boss, also a board member, has a different
opinion on the topic. Typically, again in my limited experience,
boards with a large number of insider directors, many times but not
always, have a CEO who is very, very powerful and that power is
enhanced by minimizing outside director content on the board.

Keep in mind too that most outside directors are CEO’s in their own
companies and are serving on another company’s board because of their
success with their own company. They may be serving on a board in
their retirement so as to “keep an oar in the water.”

Here is an interesting article concerning the inside versus outside
director question:

8. Here then is the theoretical structure:

A. Shareholders
B. Board of Directors – led by its Chairman (who may be CEO)
C. CEO – (Chairman)
D. COO – President
E. Executive Vice Presidents
F. Vice Presidents
G. General Managers
H. Managers
I. Supervisors
J. Workers
Of course there are many permutations.

9. To really confuse things sometimes (at least it seems that way),
some corporations have an executive position called a “Director” that
is senior to a Manager or General Manager, but is junior to a Vice
President. This is particularly true in staff positions (like
accounting, marketing, etc.)  This “Director” position is not to be
confused, and is certainly not the same as a member of a Board of
Directors, also referred to as “a Director.”

I hope that I have been able to make corporate hierarchy more
understandable for you.  IF YOU HAVE ANY QUESTION, please click the
Ask for Clarification BUTTON and I will get right back to you.

Thanks for visiting us.


Search Sources:

Black’s Law Dictionary
“corporate governance”
“corporation board” + structure

Request for Answer Clarification by ooogleemooglee-ga on 17 Oct 2002 20:41 PDT
That is one heck of an answer. It was very helpful, but I just need a
little more clarification about the role of the President. I will use
the company, Dell, for the example.

As we all know, Michael Dell founded Dell in 1984 as a college
student. So with his limited business experience, he was smart enough
to know that he needed to make key management hires when his company
started to grow rapidly. In 1986, he hired Lee Walker as president.
All I know about him is from the Michael Dell's book, Direct From
Dell, and it gives little information about him except that he played
a crucial role in shaping their Board of Directors. I am presuming
since he hired Lee Walker as President, Michael Dell still held the
role of CEO. So what I want to know, which person at that time, which
were basically the start-up years of the company, actually ran the
company? Was Michael Dell just holding the CEO title but actually
taking orders from Lee Walker. I was thinking that Lee Walker actually
ran the company until Michael Dell gained enough experience to do it
on his own. They really didn't have a Board then, so it was just Lee
Walker and Michael Dell setting policy.

This is where I needed clarification, because like you said, a
President is the COO, but COO roles aren't usually created until a
company gets "big". And in 1986, just two years after the birth of the
company, I don't think Dell's size was big enough yet to justify an
actual separation of a CEO and COO.

So I'm asking if founding entrepreneurs are in charge of day-to-day
operations, especially at a company's start-up stage. What role would
a President play during that stage...hence the example of Michael Dell
and Lee Walker.

Clarification of Answer by weisstho-ga on 18 Oct 2002 07:24 PDT
Great question. Thanks for asking. 

As to the Dell situation, I can only imagine that the relationship
between Michael Dell and Lee Walker was a "partnership" where each
brought different skills and intellectual capital to the executive
suite. I can't imagine that one was the "boss" and the other the
"subordinate"; rather everyone knew that Mr. Dell was the largest
shareholder and was ultimately in charge. I am sure that Mr. Walker
knew that he served "at the pleasure of Mr. Dell."  However, I am also
sure that Mr. Dell knew that the success of HIS company, HIS Baby (so
to speak) was conditioned on his ability to share the executive suite
with an experienced executive who could share his vision, shared his
beliefs, and could be the added spark to move the company forward.
Further, I will bet that Mr. Dell was trying to send a message to the
outside world - Dell Computer was no longer just a reseller of parts,
they were becoming a force to be reckoned with.  They were
sophisticated, intelligently facing the future, and had a plan.

But this kind of “partnership” in the executive suite can be fraught
with problems.  Remember when Steven Jobs was in a similar position to
Mr. Dell at Apple.  He went out and recruited John Scully from Pepsico
– everyone thought that it was a master-stroke of intelligent
management by Mr. Jobs. In the books written on the subject, Mr.
Scully is purported to have come in with an attitude of (OK – the
professional management is here – Jobs has done a great job, but now
it’s the turn of the professional MBA crowd – let’s go to work!!) 
Well, Jobs clashed with Scully – left the company, only to return and
take it over, firing Scully. No partnership there. The “I am the BOSS”
attitude (perhaps) killed it.

So what does the President of a corporation do?  I suppose the answer
is “whatever the Board tells him to do.”  And if you looked at 100
president’s job description, you would no doubt find 98 different sets
of responsibilities.  Some presidents really run the show, some are
CEO and COO, some work for figurehead chairmen, some companies don’t
even have a chairman.

Some presidents work for autocratic chairmen and have little
day-to-day say over the direction of the company.

It varies from company to company.  Look at AOL-Time Warner.  Ted
Turner as the vice-chairman, from time to time, as his wishes dictate,
will turn the company upside down, and then not show up. The president
is a lame duck who can’t get much done.

ARE FOUNDING ENTREPRENEURS IN CHARGE?  I would think that they are,
absolutely. They typically own the company – they have the say in who
is on the Board of Directors, they are the de-facto (and typically
actually are) Chairman of the Board – and their word becomes law. But
to guarantee success of their “baby” they soon realize that they can’t
do it all by themselves; they need skilled help from someone or a
group of “someones” who possess the personal chemistry to be able to
work in very close proximity to the founder. Some do it successfully: 
Dell.  Some do it, but it comes very hard:  Apple.  Some can’t do it
at all, for whatever reason (can’t share the power, need to maintain
autocratic control (“I got us this far by myself.  I can get us there
by myself, too.”) :  Pick any number of dot coms that have failed –
great idea or concept – couldn’t sustain the momentum.

If you had a great idea that grew into a large enterprise employing
thousands of people and selling your products all over the world, and
you were the majority shareholder able to do whatever you wanted, who
would you hire as president to help move the company forward?  What
skills would you need in the COO to complement your own?

Your situation would be different from mine. And mine would be
different from the next person.

Chemistry. Simple chemistry seems to be what it is all about. Having a
management team that performs like a championship crew team – everyone
pulling together toward the goal line. When one starts doing it “his
own way” you have a disaster, which may sink the skull.

I hope this helps!!

ooogleemooglee-ga rated this answer:5 out of 5 stars
Great answer. It exceeded my expectations. But an even greater
clarification to your answer also. Real solid stuff. Kudos.

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