Text 2 The Corporate Structure

Corporations have their own organizational structure with three important components: stockholders, directors, and officers.

Stockholders.

The owners of a corporation are its stockholders, sometimes-called shareholders, who hold shares of stock that provide certain rights. They get some of the corporation’s profits, in the form of dividends, and they can sell or transfer their ownership in the corporation (the share of stock) at any time. Stockholders attend annual meetings, elect the board of directors, and vote on matters that affect the corporation, as the charter and bylaws specify. They generally have one vote for each share of stock owned.

Board of Directors.

Those who govern a corporation are its board of directors. The directors, who are elected by the stockholders, handle overall management of the corporation. They set major corporate goals and policies, elect corporate officers, and oversee the corporation’s operations and finances. The number of directors varies. Small firms may have a few as three; large corporations generally have from fifteen to twenty-five.

In large corporations, the board of directors usually includes corporate executives and outside directors (not employed by the organization), who are chosen for their professional and personal expertise. Because they are independent of the firm and have varied experience, outside directors can bring a fresh view to the corporation’s activities. Outside directors for major corporations are paid an annual fee of $ 10,000 to $ 20,000 or more.

Officers.

The officers of the corporation are high-level employees responsible for achieving corporate goals and policies. Also called top management, the officers are elected by the board. They include the president and chief executive officer (CEO), vice president, treasurer, and secretary. Sometimes officers are also board members and stockholders. A company’s top management hires and directs other employees, who are responsible for the firm’s day-to-day operations.

Text 3 Joint Ventures

In a joint venture, two or more companies form a special entity to pursue a specific project, usually for a specific time. There are many reasons for joint ventures. The project may be too large for one party to handle on its own. That was the case in the Trans-Alaska Pipeline, which cost over $20 billion.

Another reason for joint ventures is that a company can reduce its risk in a new market by working with a firm whose expertise complements its own. For instance, American Express Co. teamed up with John Hancock Financial Services, a subsidiary of the insurance company, to test a new health care payment and information card. The project combined American Express’s experience in credit card operations with John Hancock’s expertise in health insurance.

Another reason for joint ventures is to increase market share. Qualex, Inc., a joint venture of Eastman Kodak and Fuqua Industries, became the leader in providing photo finishing to retail outlets.

Many of the U.S. car manufacturers have formed joint ventures with foreign automobile companies to expand their product lines. The Geo line of cars introduced by General Motors represents joint ventures with Isuzu, Suzuki, and Toyota. Mazda and Ford cooperated on the Ford Probe.