How Large Corporations are Organized

Charter and Bylaws. A corporate charter is a kind of license issued by the state in which a corpo­ration has been created. If your student company is a production company, it too will be issued a charter entitling it to function in a way similar to a corpora­tion. Corporations also are required to have a set of rules by which they operate. These rules are called bylaws.

Stockholders. The stockholders are the owners of a corporation. If any member of your family owns shares of stock in the Boeing Corporation, for exam­ple, then he or she is part owner of the nation's largest aircraft manufacturer. The number of stock­holders in open corporations (those whose stock is sold to the public) can run into the hundreds of thou­sands. Some corporations (such as AT&T) are owned by more than a million stockholders.

With thousands of owners scattered from one end of the country to the other, large corporations need some way to operate efficiently. Stockholders elect a board of directors to accomplish this goal.

Board of Directors. Corporate boards of directors are elected—usually annually - by the corporation's stockholders. In many ways they are like school boards in local communities. Just as your local school board selects superintendents and principals to operate its schools, so boards of directors choose the president and other officers to run their compa­nies. Directors decide about funds for development, how to expand, and what dividends, if any, are to be distributed to the stockholders.

This arrangement effectively separates ownership from management. Those who run the company are responsible to the directors who hired them, rather than to the stockholders directly. Although ownership and management are separated in open corporations, stockholders can participate indirectly by exercising their right to vote. Stock­holders elect boards of directors and vote on matters affecting policy.

Corporate elections are unique. Unlike political elec­tions in which everyone can cast a single ballot, stockholders are entitled to one vote for every share they own. For example, if you owned 50 shares of Boeing stock, you could cast 50 votes at every corpo­rate election.

Voting usually takes place at a corporation's annual meeting. Stockholders unable to attend can submit a written authorization, known as a proxy, voting their shares as they instruct.

Once a year the directors of an open corporation issue an annual report. The annual report con­tains information about the financial status of the corporation, a summary of its achievements, plans for the future, and other information the directors wish to share with the stockholders.

Date: 2015-02-16; view: 2039