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3-12 Forms of Business Ownership [CH 3

Illustration 3.4 How a Corporation Works

The The Board of The Chief Top Middle Supervisory
Stockholders Directors Executive Management Management (First-Line)
Officer Management

elect who assume who is who handles who handles who actually
responsibility responsible major most directs the
for overall for overall corporate operating activities of
corporate operation of decisions and decisions and other
policy and the delegates delegates employees
strategy; and organization other actual
hires and oversees decisions supervision of
operative
employees

officers of a corporation in most states and at least one annual meeting of the board.
However, most corporate boards of directors meet quarterly.
It is the board of directors that authorizes major transactions involving the
corporation and establish overall corporate policy. Upon recommendations from their
selected management team, the board makes decisions about the company’s stock,

dividends, financing arrangements and major changes in corporate holdings, such as
buying land or another company. For the management team, it is the board of
director’s responsibility to hire the corporation’s chief executive officer (CEO), who
will then seek out a competent chief financial officer (CFO), and chief operations
officer (COO). Then the management team will select the subordinate managers for
other important management positions.

After the management team is selected, then the board of directors takes on a role
of a review panel for management decisions.
However, in your small corporations (S corporation) the board of directors often
will play an active roll in the management of their company affairs.

Management

Management is a process of gathering the best qualified people with expertise and
skills that make a business profitable. The chief executive officer need not be the best
in all fields of the business, but he needs to be able to attract those kinds of people that

will complement the business, because they are responsible for the actual operation of
the corporation, subject to board approval. Then it becomes a matter of establishing a
corporate direction and delegating the authority to carry it out. The corporate
organization and its operation, as charted in Illustration 3.4, details the types of

decisions and activities at each level in the organization.

Mergers and Acquisitions
Over the past century, merger and acquisition (M&A) activity has surged and
occurred at various times. As of August 2020, there were 281 M&A transactions

valued at more than one billion U.S. dollars in the United States in that year.
merger A merger is when two or more corporations join together to become a single
Combining tow or more corporation. For example, Tenneco's JI Case division merged with the agricultural
businesses into a single division of International Harvester to form Case IH. The new company is the second
entity. largest agricultural and farm equipment manufacturer in the United States, and is an

international company with operations in Argentina, Australia, Africa, Asia, and
Brazil. Case IH formed another division, Case Construction, an international leader of
construction equipment. Case is supported by more than 12,000 dealers and

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