We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Are the Different Types of Corporate Governance Structures?

Helen Akers
By
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Corporate governance structures are usually organized in either a centralized or decentralized manner. A centralized organization will typically place decision making authority with those who are in high-level positions. The structure of the organization is a horizontal hierarchy. Decentralized corporations on the other hand give front-line employees and managers the authority to make and execute strategic decisions.

Most corporate governance structures are comprised of a board of directors, an executive management team, and departments that may be organized according to function, division, or a combination of both. The board of directors usually represents the highest level of power, control, and authority in an organization. They vote on company directives and help shape executive strategies. In terms of publicly owned corporations, the board of directors also acts as a sort of liaison between the company's executive management team and its shareholders.

A centralized organization's structure makes front-line staff and managers responsible for implementing the policies and procedures of executive management. Of the two main corporate governance structures, it allows the least amount of creativity and flexibility for its staff. They are usually not involved in the decision making process that directly affects how they perform their jobs. Some organizations solicit feedback from front-line employees, but implementation of those suggestions can often be delayed or brushed aside.

Sometimes also referred to as traditional organizations, centralized organizations assign to each position very specific responsibilities and authority. Positions are also ranked according to supervisory level and importance. Those individuals who hold positions that are higher up in the organization's hierarchy possess greater amounts of control and decision making ability. Corporate governance structures that model a traditional managerial style place the majority of the decision making with top-level positions, which may rarely interact with the company's end consumer.

In contrast, a decentralized organization gives lower level employees the authority to make decisions that directly impact the company's customer or the employees' job tasks. They do not have to go up the chain of command to get approval before acting. A decentralized organization will directly engage all employees in decisions that affect processes, procedures, and policies that might improve business conditions or job task efficiency. Of the two corporate governance structures, decentralized organizations tend to foster a more collaborative environment.

Another advantage to decentralized organizations is that the structure encourages more open communication. It also tends to result in higher levels of employee motivation and job satisfaction. Decentralized organizations are also referred to as flat or organic.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Helen Akers
By Helen Akers
Helen Akers, a talented writer with a passion for making a difference, brings a unique perspective to her work. With a background in creative writing, she crafts compelling stories and content to inspire and challenge readers, showcasing her commitment to qualitative impact and service to others.
Discussion Comments
By SkyWhisperer — On Nov 03, 2011

@hamje32 - I’m probably bucking conventional wisdom, but I like the larger organization. I like being told what to do (politely) and knowing what my boundaries are.

In my experience it has not hindered my creativity or professional advancement. Some companies, especially in the telecommunications or technology sector, have a hierarchical structure but still operate like small businesses.

They encourage employees to make suggestions and operate in a streamlined manner. I don’t think it’s an issue of the size of the business. I think it’s more of a reflection of corporate philosophy and the style of the company’s leadership.

By hamje32 — On Nov 02, 2011

I’ve found that the governance structures tend to follow the size of the business. Smaller businesses tend to be decentralized in their planning, giving employees greater input in helping to define the direction of the company. Ideas are welcomed and there is a lot more openness and creativity.

In the larger companies, you kind of work within your little cubicle, although I suppose that you can express whatever ideas you want within that context.

I’ve worked for both types of companies. I like the freedom in the small business structure, but there is something I was not prepared for. In a small business, you can’t wait for people to tell you what to do.

I had been expecting to be “managed” when all the time I was supposed to self-manage, taking a more proactive stance in figuring out what needs to be done and doing it. It’s been a learning experience, but it's still fun nonetheless.

By chivebasil — On Nov 01, 2011

I have worked in both kinds of organizations and I have to say that I definitely prefer working in more open corporate governance structures.

When I worked in a more top down system I felt like I had no say at all. I did what my boss said while also trying to cover myself when I was giving instructions to people below me. My input didn't really matter at all.

Now that I am in a more open structure I feel like I make a real contribution. My input matters and I have been give a lot of responsibilities. Frankly, I feel like I am working harder and more effectively than I ever had before. And its been worth it. I am making more money, my work is more interesting and I think I will continue to move up in this company.

By summing — On Oct 31, 2011

I think that organizations can experiment with both kinds of structures and can even incorporate elements of both into successful institutions.

Really the best way to proceed is to examine corporate governance best practices. Institutions around the world have carried out detailed case studies about organizational structures. There is a wealth of experience that can be drawn on when establishing a management structure. A lot of the corporate governance issues can be avoided by just examining what has come before.

By gravois — On Oct 31, 2011

In my experience, lots of companies start out with a horizontal structure and many thrive for years in this system. But as they grow, and especially once they reach a certain size, they inevitably become more hierarchical. Most of the worlds largest companies exist in this structure. Some experiment with more open structures but they are essentially top down.

I hate to sound cynical, but I think that hierarchies are kind of natural. Its hard to keep track of everything in huge multi national corporations. Closed and easily ordered systems make sense a lot of the time. This is born out by the evidence.

Helen Akers
Helen Akers
Helen Akers, a talented writer with a passion for making a difference, brings a unique perspective to her work. With a...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.