HUMAN RESOURCES -
Human Resources is the set of individuals who make up the workforce of an organization, business sector, or economy. "Human capital" is sometimes used synonymously with human resources, although human capital typically refers to a more narrow view (i.e., the knowledge the individuals embody and economic growth). Likewise, other terms sometimes used include "manpower", "talent", "labor", or simply "people".
Corporate Structure consists of various departments that contribute to the company's overall mission and goals. Common departments include Marketing, Finance, Accounting, Human Resource, and IT. These five divisions represent the major departments within a publicly traded company, though there are often smaller departments within autonomous firms. There is typically a CEO, and Board of Directors composed of the directors of each department. There are also company presidents, vice presidents, and CFOs. There is a great diversity in corporate forms as enterprises may range from single company to multi-corporate conglomerate.The four main corporate structures are Functional, Divisional, Geographic, and the Matrix. Realistically, most corporations tend to have a “hybrid” structure, which is a combination of different models with one dominant strategy.
Corporate Governance is one of the main reasons that these terms exist. The evolution of public ownership has created a separation between ownership and management. Before the 20th century, many companies were small, family owned and family run. Today, many are large international conglomerates that trade publicly on one or many global exchanges.
In an attempt to create a corporation where stockholders' interests are looked after, many firms have implemented a two-tier corporate hierarchy. On the first tier is the board of governors or directors: these individuals are elected by the shareholders of the corporation. On the second tier is the upper management: these individuals are hired by the board of directors. Let's begin by taking a closer look at the board of directors and what its members do. Please note this article focuses on corporate structure in the U.S.; in some other European countries corporate structure might be slightly different.
Board of Directors
Elected by the shareholders, the board of directors is made up of two types of representatives. The first type involves individuals chosen from within the company. This can be a CEO, CFO, manager or any other person who works for the company daily. The other type of representative is chosen externally and is considered to be independent from the company. The role of the board is to monitor a corporation's managers, acting as an advocate for stockholders. In essence, the board of directors tries to make sure that shareholders' interests are well served.
As the other tier of the company, the management team is directly responsible for the company's day-to-day operations and profitability.
The Bottom Line
Together, management and the board of directors have the ultimate goal of maximizing shareholder value. In theory, management looks after the day-to-day operations, and the board ensures that shareholders are adequately represented. But the reality is that many boards consist of management.
When you are researching a company, it's always a good idea to see if there is a good balance between internal and external board members. Other good signs are the separation of CEO and chairman roles and a variety of professional expertise on the board from accountants, lawyers and executives. It's not uncommon to see boards that consist of the current CEO (who is chairman), the CFO and the COO, along with the retired CEO, family members, etc. This does not necessarily signal that a company is a bad investment, but as a shareholder, you should question whether such a corporate structure is in your best interests.