DEFINITION of 'Corporate Hierarchy'

The term corporate hierarchy refers to the arrangement of individuals within a corporation according to power, status and job function. It is a form of organization structure that delineates authority and responsibility, designating who has supervisory leadership over employees, departments, divisions, and other executives dependent on their place within the strata. This may also be referred to as the "chain of command," as it outlines where decision make powers reside, as well as who must adhere to those orders and who may supersede and make changes to the plans of their subordinates.

In a public company, the board of directors led by a chairperson usually resides at the top of the hierarchy. The directives set forth by the board, which typically include goals for revenue and profit growth, are put into detailed action through the executive leadership. This executive layer of management is typically headed by the CEO, who may also be the chair of the board of directors as well as the president. Below the CEO will be other C-level executives, such as the CFO, CIO and COO, followed by upper management (vice-presidents/managers/directors), then by the employees in each department, who are further broken down into levels of experience and authority.

BREAKING DOWN 'Corporate Hierarchy'

Each company's hierarchy will vary from this general structure. Corporate hierarchy affects the employees' ability to advance within the company and also impacts corporate culture. Corporations can have hierarchies that are considered more vertical, where the power comes from the top down, or a more horizontal hierarchy, where power and responsibility are more evenly spread across the firm.

How Corporate Hierarchy Affects the Workplace

The configuration of corporate hierarchy typically evolves as an organization matures. The founding team may make up the executive leadership, which can have a loose structure when a company launches. As more managers, employees, and investors become part of the endeavor, new layers almost inevitably are introduced to give clarity to the organization’s operational flow and the duties of each member.

There are instances of companies that state they have nontraditional corporate hierarchy, typically as a means to share responsibility across all employees and leaders. This may also influence elements of corporate culture, such as the layout of the company’s office. In many organizations, the higher one’s standing is in the hierarchy will affect the size, location, and aesthetics of their workspace. Premium office space, for instance, is often reserved for executives. Access to perks such as chambers reserved for executive use or, if within the company’s means, use of private jets and car service might also be included for members of upper leadership.

RELATED TERMS
  1. Hierarchy Of GAAP

    The Hierarchy of GAAP refers to a four-level framework that classifies ...
  2. Holacracy

    A holacracy is a system of governance where members of a team ...
  3. Chair of the Board (COB)

    The chair of the board (COB) is the most powerful member on the ...
  4. Corporate Culture

    Corporate culture refers to the beliefs and behaviors that determine ...
  5. Chief Executive Officer - CEO

    A CEO is the highest ranking executive in a company whose main ...
  6. Executive Director

    An executive director is the senior operating officer or manager ...
Related Articles
  1. Investing

    Citigroup Downgraded as BMO Reorders Big Bank Hierarchy

    Analysts end a pair trade call of going long on C, short on WFC as the valuation gap narrows.
  2. Retirement

    Who Can Really Help at Your Local Social Security Office

    Many calls to Social Security end in frustration. It doesn't have to be that way.
  3. Managing Wealth

    3 reasons to separate CEO and chairman positions

    Separating the high-profile positions of chairman and CEO can help to strengthen the overall integrity of a company.
  4. Investing

    Evaluating the board of directors

    Corporate structure can tell you a lot about a company's potential. Learn more here.
  5. Insights

    Facebook Enters Enterprise Productivity Space With Workplace (FB, GOOG)

    The Menlo Park-based company's new app is not a drag on office productivity.
  6. Personal Finance

    The Priorities of Personal Finance

    Before saving everything for retirement, make sure you're living life now and have insurance in place.
  7. Trading

    Seven Emerging Currencies Challenging The Forex Hierarchy

    While the top-seven currencies follow a somewhat stable hierarchy, second-tier currencies can be all over the map.
  8. Personal Finance

    What's Your Employee Value?

    Have you ever wondered how much you're worth to your boss? Here's a method for calculating that value.
  9. Financial Advisor

    Beware Of Company Stock In Qualified Plans

    While this strategy does have a few advantages, it can also pose some substantial risks to employees.
RELATED FAQS
  1. What does a merger or acquisition mean for the target company's employees?

    Learn about the likely impact of a merger-and-acquisition deal on the target company's employees, including their benefits ... Read Answer >>
  2. How do a corporation's shareholders influence its Board of Directors?

    Find out how shareholders can influence the activity of the members of the board of directors and even change official corporate ... Read Answer >>
  3. What kind of securities should a risk-averse investor buy?

    Understand what risk aversion means in terms of investment, and learn the investment options available to investors who prefer ... Read Answer >>
Hot Definitions
  1. Investment Advisor

    An investment advisor is any person or group that makes investment recommendations or conducts securities analysis in return ...
  2. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
  3. Inflation

    Inflation is the rate at which prices for goods and services is rising and the worth of currency is dropping.
  4. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  5. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  6. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
Trading Center