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A more detailed discussion on the board of directors is contained in Chapter 10, “The Integrity of
Financial Reporting.”
Officers
The third level of decision making in the normal corporation is that of the officers, who take on the
day-to-day operational responsibilities. Officers are elected by the board and consist, at a minimum, of
a president, a treasurer, and a secretary or clerk (keeper of the corporate records). Many corporations
elect additional officers such as vice presidents, assistant treasurers, CEOs, and the like.
Thus, the decision-making control of the corporation is exercised on three very different levels.
Where each decision properly belongs may not be entirely obvious in every situation. The decision to
go into a new line of business would normally be thought of as a board decision. Yet if by some
chance the decision requires an amendment of the corporate charter, a vote of stockholders may be
necessary. On the contrary, if the decision is merely to add a 12th variety of relish to the corporation‟s
already varied line of condiments, the decision may be properly left to a vice president of marketing.
Often persons who have been exposed to the preceding analysis of the corporate-control function
conclude that the corporate form is too complex for any but the largest and most complicated publicly
held companies. This is a gross overreaction. For example, if Phil, our software entrepreneur, should
decide that the corporate form is appropriate for his business, it is very likely that he will be the
corporation‟s only stockholder. As such, he will elect himself the sole director and his board will then
elect him as the president, treasurer, and secretary of the corporation. Joint meetings of the
stockholders and directors of the corporation may be held in the shower adjacent to Phil‟s bathroom
on alternate Monday mornings.
Limited Partnerships
As you might expect, the allocation of control in a limited partnership is reflective of its origin as a
hybrid of the general partnership and the corporation. Simply put, virtually all management authority
is vested in the general partners. The limited partners normally have little or no authority, analogous to
minority stockholders in a corporation. Third parties cannot rely on any apparent authority of a limited
partner, because a limited partner‟s name will not appear, as a general partner‟s name may, on the
limited partnership‟s certificate on the public record.
General partners exercise their authority in the same way as they do in a general partnership. Voting
control is allocated internally as set forth in the partnership agreement, but each general partner has
the apparent authority to bind the partnership to unauthorized contracts and torts to the same extent as
the partners in a general partnership.