An abstract model of who controls a company: shareholders appoint a board, the board appoints management, and oversight flows back up. Use the buttons to follow authority down and accountability up.
Corporate governance is the set of relationships that decide who controls a company and who answers to whom. This diagram reduces it to three tiers stacked top to bottom: the owners, the board they appoint, and the management that runs the business. Two kinds of flow connect them — authority going down and accountability going back up.
Owners usually want returns without managing every decision, so they appoint a board to act for them. The board, in turn, hires professionals to run operations. Each layer is a delegation of authority paired with an obligation to report back.
Delegation only works if someone verifies the results. Board committees focus on specific duties such as auditing, pay and nominations, while an external auditor independently inspects the finances. Together they give the board and the owners a reason to trust the numbers management reports.
This is a deliberately abstract model. It is not drawn from any particular company, country or legal system, and it makes no judgement about any of them.
The owners of the company put capital in and, rather than directing every decision, appoint a board of directors to act on their behalf. This is the first downward grant of authority.
The board chooses the executives who will run the business, sets the company's direction, and can replace senior management if performance falls short. A second solid arrow carries authority down again.
Executives operate the firm day to day and report results back to the board. This upward dashed arrow is the counterpart of the authority that was delegated down.
The board reports and discloses how the company is doing to the owners, closing the accountability loop from management all the way back to the top.
Board committees look closely at specific areas — audit, pay, nominations — and an external auditor independently examines the finances. These side flows give the board and owners an outside check on what management claims.
Corporate governance is the set of relationships that decide who controls a company and who answers to whom. In this simple model it runs in three tiers: owners (shareholders), the board of directors they appoint, and the management that runs the business day to day.
The board sits between the owners and the operators. It sets the company's direction, hires and can replace senior management, and oversees how the business is run on the owners' behalf.
In this simplified model, owners appoint a board so they do not have to direct day-to-day decisions themselves. Management reports to the board, and the board reports and discloses results to the shareholders.
Both are checks. Committees are board subgroups focused on jobs such as auditing, pay or nominations. An external auditor is an outside firm that inspects the finances independently, so the numbers management reports can be verified.
No. It is a deliberately abstract model used only to show the flow of authority and accountability. It does not describe or judge any real organisation, country or political system.