We the People of the Yourname Corporation, in Order to form a more perfect company, establish Justice, insure corporate Tranquility, provide for the common Defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do Ordain and establish this Mission Statement for the Yourname Corporation.
I was thinking the other day about the structure of the government and how long that structure has been in place. Ok, nothings perfect, but it’s a darned good system. And, hey, since it’s worked well for so long, why don’t companies have the same type of structure?
My thought bubbles:
- Can companies learn from the U.S. Constitution?
- Should companies have a constitution OR a mission? What’s the difference?
- Should you have three branches of oversight in your company that mimics our Constitutional structure?
- If so, do you teach corporate civics within your organization so corporate citizens understand the structure.
What came next was more thinking – yep. The result: an extremely high level view with comparisons between corporate and government structures.
Remember: HIGH LEVEL with a decided CFO focus.
Traditional corporate structure:
Board of Directors – creates the mission and structure of the company, protects the interests of the shareholders, reports on the progress and operating results via an annual or quarterly report.
Corporate Officers – appointed by the board and responsible for running the corporation based on the mission created by the board.
Employees – they implement the directives of the Corporate Officers dictated by the board.
Shareholders – influence the board to change the mission and the structure of the company if the company is not returning the results shareholders want. They can elect and remove directors, vote on mergers, acquisitions, dissolutions and make changes to the By-Laws and Articles of Incorporation.
Traditional corporate structure translated to our Constitutional structure:
Board of Directors = U.S. Congress
Corporate Officers = Executive branch
Shareholders = U.S. citizens
Employees = civil servants, military, etc.
So where’s the Judicial branch? Hmmm…
…in publicly traded companies, the Judicial Branch could be the independent auditors that make sure all the “laws” promulgated by the BOD and executed by the Executive team are in compliance. They “rule” on the accuracy of financial reporting and compliance with all corporate governance documents.
Privately held companies?
They’re not required to have a “Judicial Branch” – an external audit. Lending covenants or a shareholder agreement might trigger an audit requirement. But in this exercise, we need this Judicial piece to have a Constitutionally correct structure. But, come on, the word “audit”conjures feelings of panic. Nobody likes ‘em, and nobody really wants to go through ‘em. It is a compliance issue that costs both money and time (which is money).
Hmmm, again…the “Constitutional” role of this piece is undeniable. An independent entity with the proper professional expertise and authority reviews the operations of the company and issues an opinion on whether corporate “laws” are being adhered to. The Judicial Branch.
So, now we have our constitutional structure. Is it helpful to teach corporate civics to employees? YES! Here’s the curriculum: let them know who enacts new corporate “laws”, who enforces corporate ”laws” and who interprets “laws” in the case of disagreement. Armed with this knowledge, maybe employees know how they contribute to the existing structure and the checks and balances built into the business that pays them.
This corporate structure is intended to “insure corporate Tranquility, provide for the common Defense, promote the general Welfare, and secure the Blessings of Liberty” of our businesses. Isn’t that what we all want?
“Experience breeds wisdom, and wisdom breeds vision – Dalai Lama XIV”