This article has been written by Arnab Sarkar pursuing Crack California Bar Examination – Test Prep Course at LawSikho, and has been edited by Shashwat Kaushik.
It has been published by Rachit Garg.
Table of Contents
A company is a legal entity that may be formed by a natural person/s a legal person/s or both. Every member of the same company has the same or a specific purpose to achieve the company’s goal. Managing a company means managing its administration as well as its systems to develop its business and profit-making machinery. With respect to the goal, the company is formed by voluntary associations as non-profit organisations, by business entities as profit-making associations, by financial entities like banks, or by any programme like educational institutions.
Need for management and control of a company
To achieve this goal, every company needs strong and effective management. There are different levels of management that aim to organise and coordinate the business of the Company. Literally, management means the process of planning and organising the resources and activities of a business to achieve a goal. Efficient management can complete the task with minimal cost; in this respect, it can be said that efficient management is the primary need of a company. Most of the management team supervises a company, its service, or its production. However, an efficient body of management should be multidimensional. It will influence their team members to apply their strengths towards achieving the company’s goal. A dynamic body of management adapts to new market requirements by implying updated technology. An intangible body of management consists of ideology, policies, and human interaction; it helps to improve a company’s target achievement ratios, employee satisfaction levels, and overall ease of operation.
Management and control of a company
Management of the company means the process of planning, organising, leading, and controlling all the efforts of the company members and using all the resources of the company to achieve the company’s goal. To fulfil the goal or objective of the company, there are a number of stakeholders, like directors, managers, officers, and shareholders. In a simple sentence, it can be said that forming such bodies of members and, accordingly, proper planning to achieve goals is the responsibility of the management of the company in general. In the management of companies, every individual, whether legal or natural, has a specific role and responsibilities to achieve the goals of the company. Maintaining such roles and responsibilities towards every individual attached to the company and the proper distribution of such roles and responsibilities in view of the ultimate development of the company is the main goal of the management of any company.
Body of management to control a company
The body of management comprises various stakeholders, as said earlier, like directors, managers, officers, shareholders or partners, and executive workers. The entire body of management has specific roles and responsibilities to achieve the ultimate goal of the company. We can define the body of management like owners, partners, or shareholders; at the top they may be called the board directors, or the directors may appoint in the form of managerial, executive, sales, etc.; then come officers like CEO, COO, CTO, CLO, CMO, etc.; then come other executive managers and workers. Arranging funds or accumulating material resources is the main objective or role of the owners, partners, or shareholders; developing ideas with resources and investment to achieve the goal of the company is controlled by chief officers like the CEO, COO, CLO, CMO, etc.; and executing such ideas and making them happen in the real world is the responsibility of the executive managers and workers. We can clarify the positions, roles, and responsibilities of management in a company as follows:
Shareholders are basically people who invest funds for the company’s growth with the desire to build their own profit. In a simple equation, if the company can develop its business and make a profit, it will distribute it to its shareholders. So the role and responsibility of the shareholder are very clear the shareholders have to manage the fund for the company, and in return, they will get the profit. As the company has grown, its need for funds has grown, and as a consequence, the legal ownership has become widely dispersed.
In a system of management, a director or the board of directors plays the most vital role in a company. Directors are none other than the representatives elected by the shareholders. In general, directors may be executive or non-executive. Executive directors are the decision makers for the company; they are involved with the regular management of the company, and non-executive directors offer advice for the company without being involved with the regular management. In view of the Companies Act of 2013, a private limited company should have a minimum of two directors, a limited company should have a minimum of three directors, and only one director can form a one person company. According to Section 2(34) of the Companies Act 2013, a ‘director’ is a person appointed to the board of the company by the shareholders, and a group of such individuals is called the board of directors. Since the company is an artificial legal person created by law, it is necessary to control the management and act through the natural persons who are the directors of the company. There are many types of directors as per their roles and responsibilities, such as:
Managing director- According to Section 2(54) of the Companies Act 2013, someone who entrusted with substantial power of the management affairs of the company
Whole time director- according to Section 2(94) of the Companies Act 2013, the whole time director means a director in the whole time employment with the company.
On the basis of function in the company, the managing directors and the whole time directors are called executive directors. Both types of directors are directly involved with the company’s regular management and control. According to Rule 2(1)(k) of the Companies (Specification of Definitions and Details) Rules of 2014, the executive director means whole time director.
Independent director- According to Section 149 of the Companies Act, 2013, when read along with Rules 4 and 5 of the Companies (Appointment and Qualification of Directors) Rules of 2014, it will be clear that the position of independent director is a non-executive director to Examine the performance of the management in meeting the decided goals and objectives and examine the reporting of performance.
Nominee director- The nominee director has been appointed by virtue of Section 161(3) of the Companies Act 2013 as a non-executive director who will be active in decision making in financial matters in an investee company, including fundraising plans such as debt raising and investment planning.
Beside these, there are many other types of directors on the basis of appointment and other ways, like additional directors, alternate directors, women directors, residential directors, etc.
In the management of a company, the board of directors is responsible for the overall direction of the company, but the day-to-day work is carried out by the officers of the company. To carry out the company’s day-to-day work, the company may appoint as many officers as it requires. Such officers may be designated as executive officers, law officers, sales officers, operating officers, etc. In any company, if the company’s bylaws permit, one or more directors can also serve as officers. In a small company, one person can serve as a shareholder, a director, and an officer. If the company requires it, then the same person can serve in more than one officer position at the same time. Also, additional officers can be appointed based on the growth of the company. There are various types of chief officers, according to their roles and responsibilities. Some of the most popular types of chief officers are:
Chief Executive Officer (CEO) is the person who is ultimately accountable for a company’s decision making, operation, marketing, resource management, strategy making etc. It is not necessary that the CEO of a company be the owner or head of the company; sometimes it may be.
Chief Operating Officer (COO) is the second highest executive in a company and is in charge of company’s day-to-day operations as well as executing the company’s goals
Chief Financial Officer (CFO) is a person who manages the company’s finances, including financial planning, management financial risk, record keeping, financial reporting, etc.
Chief Marketing Officer (CMO) is a corporate executive responsible for managing the marketing activities of the company.
Chief Technological Officer (CTO) is an executive who focuses on scientific and technological issues within the company
Chief Information Officer (CIO) is a high ranking executive responsible for managing and implementing information and computer technology in a company.
Chief Legal Officer (CLO) is a legal executive who used to confront or manage litigation risk on major legal and regulatory issues.
In a company, there might be a number of positions for managers as per their roles and nature of work. Managers report to the chief officers, president, or director of the company. Supervisors and executives are working under the managers. Managers are several types in respect of functions, such as account managers to manage and maintain account books, recruiter managers and human resource managers to recruit people and develop human resources to run the company’s works, technological managers to develop the product or service of the company, sales and marketing managers to manage and develop sales and marketing of the company, regional managers to develop company’s operations on regional basis, general managers to manage the company’s overall functions, etc.
Supervisor, production/sales executives and field workers
After the manager, the supervisor has the responsibility to ensure the product and service of the company in its particular field. Production executives, sales executives, and field workers all report to the supervisor, and the supervisor reports to managers. To control proper service and continue product quality, any company should depend upon these stakeholders; in short, these people are the backbone of the company to manage and properly control.
Management is the respiratory system of any company. Good management of a company can help increase company activity and take good care of the employees. It can also help to utilise the financial resources in the best possible manner for the company to achieve profit and sales targets and ensure the utilisation of material resources with minimal wastage. A responsible team of management can help the company update its machinery and equipment and supervise its replacement or updating when needed. It can be concluded that without an efficient body of management, no company can run its business.
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