How to Appoint a Corporate Officer

What is a corporate officer?

Officers of a corporation are senior employees responsible for managing a company's daily operations, ensuring smooth operations and compliance with a corporation's bylaws and regulations. 

These day-to-day operations include record-keeping, financial management, staffing, and task delegation. As managers, corporate officers also make many policy decisions required to run things effectively.

These are the leaders of the company, so the board of directors appoints officers who they feel are most capable of handling the duties asked of them.  

Corporate officer duties

Corporations carry a "corporate veil" that protects officers from personal liability in company affairs—meaning, if the corporation faces lawsuits or debts, the officers’ personal assets are typically shielded from these claims. 

Nevertheless, this doesn't give officers complete freedom to act as they please. They have fiduciary duties to the corporation, which typically includes the following:

• Duty of care. Making informed and careful decisions
• Duty of loyalty. Avoiding conflicts of interest and putting the company’s needs first 
• Duty of good faith. Acting with the intention to preserve the company's best interests

The officers’ duties are usually outlined in the corporation’s bylaws, and it’s up to the board to monitor compliance and ensure they meet the expectations. 

Corporate officer legal responsibilities

Officers can be held personally liable if they breach their fiduciary duties, depending on the scope of their authority and degree of negligence. For instance, if company audits show that a business failed to meet its legal responsibilities, officers will be expected to demonstrate to audit committees that they conducted appropriate due diligence in carrying out their day-to-day operations.

However, failing to demonstrate due diligence, or failing to act in the company's best interests, could enable other stakeholders to hold the officer liable for corporate transgressions under the law.

Still, under the business judgment rule, courts generally won’t dispute an officer’s decisions if they were made in good faith, with care, and in the company’s best interests.

How to appoint a corporate officer

Each state has its own laws that govern corporations and what officers they must have, but generally, the process to appoint one involves these steps: 

Authority to appoint

Officers are appointed by the board of directors, beginning with the initial appointments during incorporation. Most states require corporations to have at least a president, secretary, and treasurer—though many corporations create additional roles like chief technology officer (CTO) or chief marketing officer (CMO), among others.

While it’s possible for one employee to fill all positions, particularly in smaller corporations, larger ones usually spread the responsibilities among several officers. A shareholder or corporate director can also serve as an officer, but it’s ultimately at the board’s discretion to appoint new officers when necessary—whether due to resignations, corporate growth, or restructuring. 

Define the role

Before making an appointment, the board needs to define the scope of each officer’s position, including specific duties, reporting relationships, and expectations. Typically, the company documents these details in the articles of incorporation, corporate bylaws, or resolutions. 

Then, the board of directors considers who best aligns with the requirements and is most likely to act in the corporation’s best interests. 

Board resolution

Corporations must implement and follow a formal procedure to appoint new officers, typically through a board vote during an official corporate meeting. After the meeting is announced to shareholders, the board will gather to discuss the candidates, hold a vote, and document the results in the meeting minutes—an official and permanent record.

Contract and compensation

Like any new position, officer appointments involve standard salary and contract negotiations. Once the board and the candidate reach an agreement, they’ll outline the officer’s compensation, benefits, performance bonuses, and other relevant terms in a contract. 

As corporate officers, their contracts typically include clauses for the corporation’s security, including nondisclosure agreements (NDAs) and measures to protect internal trade secrets. 

However, it’s worth noting that the Federal Trade Commission (FTC) is currently working to restrict new noncompete clauses, though existing noncompetes for senior executives are still effective. 

Notification and documentation

Once appointed, the officer formally begins their new role. From this point forward, the officer has the authority to act on behalf of the corporation within their defined scope. Still, the board should provide them with the necessary resources and support to fulfill their responsibilities. 

Aside from notifying shareholders, many states require corporations to file updates with their Secretary of State’s (SOS) office or similar state authority when officer appointments change. 

What is the difference between officers, directors, and shareholders?

Shareholders, officers, and directors serve different purposes but have some overlap:

• Shareholders own shares in the company but don’t manage daily operations. Still, they have voting rights at shareholder meetings and can elect or remove corporation directors.
• The board of directors represents the ownership interest and makes strategic decisions on behalf of the shareholders rather than overseeing a company's daily operations. ​​Only the board of directors can make, amend, or repeal a corporation's bylaws.
• Officers run the corporation, manage day-to-day responsibilities, and report to the board.

Modern corporate structure maintains a clear distinction between the ownership and the management team. However, an officer can also be a director, attending regular meetings along with the board of directors. In many cases, the president or CEO is also a board member. 

Corporate officers may also have an ownership interest by holding shares, meaning that they can vote at shareholders' meetings, but this is not mandatory.

Who are the officers of a corporation?

A corporation's officers typically hold a senior position, and each takes care of specific aspects of the corporation's activities. At the bare minimum, this kind of business structure only needs a single officer. In a small business, one officer might occupy several roles, while a larger business might employ other officers.

There are three common officer roles: president, secretary, and treasurer. In addition, many corporations have other officer positions, some of which are listed here: 

President

The president is a required officer in a corporation. Presidents will have ultimate responsibility for the corporation's operations unless there is a separate chief executive officer (CEO), in which case they might focus more on specific aspects of the business. Often in a small corporation, the president is also the CEO. In a large corporation, a vice president reports to the CEO. Each vice president in a corporation often manages discrete areas of the business.

Secretary

The corporate secretary is the linchpin for business affairs and corporate governance. Legal duties include signing the annual return, producing statutory declarations, creating a statement of affairs in case of receivership or winding down, and certifying financial statements in the annual return. The secretary also handles many other governance-related tasks, including informing the corporation's board of regulatory changes, managing accounting and registration duties, and maintaining records in accordance with the law. In addition, the secretary documents board meetings.

Treasurer or chief financial officer (CFO)

The treasurer is responsible for the financial reporting and control within a business. Treasurers provide services including managing cash flow and preparing accurate, timely reports of the corporation's finances for stakeholders. A treasurer, also known as the chief financial officer (CFO), decides how to invest, oversees capital structure, and plans financial strategies around risk and liquidity on the company's behalf. They also produce economic forecasts and models to guide future strategy and mitigate financial risks in other areas.

Chief executive officer (CEO)

The CEO takes a broad view of company operations. They serve as the connection between the corporation and the board of directors, updating them with corporate developments and a top-level view of finances, staff, and product direction. Likewise, the CEO reports directly to the board.

Chief operating officer (COO)

Also known as the chief operations officer, the COO oversees the successful creation of sellable products, whether that's in manufacturing or new service lines. The COO supervises the processes that produce these products and also manages quality control to make sure that customers are getting an acceptable product or service. As such, the chief operating officer and the chief executive officer often will work closely together. In some companies the president and COO will be the same employee.

Chief marketing officer (CMO)

As the head of the marketing department, the chief marketing officer is responsible for building, nurturing, and protecting the brand. CMOs spearhead campaigns that bolster brand awareness and generate sales for the corporation.

Chief revenue officer (CRO)

The chief revenue or chief sales officer brings in money by overseeing and executing sales strategies. They manage targets and analyze sales efficiency to hit business goals. Chief revenue officers will also keep an eye on the future, forecasting sales and planning for adverse conditions that could stop the business from hitting its sales goals.

Chief information officer/chief technology officer (CIO/CTO)

The chief information officer/chief technology officer (CIO/CTO) both focus on technology but serve different sets of users. A CIO manages a company's IT operations and infrastructure, applying technology to improve internal processes and maximize efficiency. Meanwhile, a CTO creates technology products and services to help make customers' lives better. Their roles often overlap, as internal IT processes often affect the customer experience, and both of these officers manage technology issues such as risk, vendor negotiations, and budgeting.

Does my company need to appoint corporate officers?

The law requires officers to be appointed in an incorporated company. A C corporation can have unlimited shareholders and must pay corporate tax, while those drawing income from the corporation are also held liable for personal tax. An S corporation may only have 100 shareholders but does not pay tax at the corporate level. Either way, both a C and S corp must have officer positions.

FAQs

Is a corporate officer the same as an owner? 

Technically no, shareholders are the owners of a corporation, while officers operate the corporation. However, corporate officers can also be shareholders—whether by purchasing company stock certificates individually or receiving it as part of their compensation. 

Who qualifies as a corporate officer?

Generally, corporate officers are high-level management executives with decades of business expertise serving in leadership roles. That said, the board of directors ultimately determines the specific qualifications based on the corporation’s needs. 

Do corporate officers need to be listed in public filings?

Corporations must typically disclose their officers in various public filings, including annual reports, state filings, SEC reports, and other official documentation. Still, this depends on the state and the regulatory requirements applicable to the corporation. 

Do LLCs have corporate officers?

A limited liability company (LLC) needs neither officers nor directors. An LLC has members rather than shareholders, and those members can decide on the most appropriate business decisions. They might decide to appoint officers, but that is optional.

Danny Bradbury contributed to this article.