In corporate law, an officer is a person who is chosen by the board of directors to run the day-to-day operations of a corporation. Officers serve the corporation at the board's pleasure and can be fired at any time (absent a contrary provision in their employment contract).
The traditional officer positions
Traditionally, there are four officer positions in every corporation: the president, vice president, secretary, and treasurer. Under most traditional statutes, one person can hold more than one of these positions, with the caveat that the president and secretary must be different people. Under such a legal regime (which exists in the UK, among other places), you'd need at least two officers. A few traditional jurisdictions allow all four positions to be held by one person.
- The president is the person given general supervision and control over the corporation's daily affairs. They are responsible for signing contracts and other documents on behalf of the corporation. The president is often, but not always, chairman of the board as well.
- The vice president takes over for the president if the president is unavailable. There can be more than one vice president: they take priority in an order the corporation designates, or lacking such an order, in the order in which they were appointed.
- The secretary is responsible for corporate documents, such as minutes from the board meetings and annual shareholder meetings, and contact records for each shareholder. They also co-sign certain documents, such as stock certificates, with the president.
- The treasurer is in charge of the corporation's finances.
Corporations in traditional jurisdictions are free to expand on these default positions by placing appropriate job descriptions in their bylaws.
The modern officer positions
Under the Delaware General Corporation Law, which governs most big American companies, and the Model Business Corporation Act, which forms the basis of many other states' corporate laws, there are no fixed officer positions. Corporations are left to their own devices when it comes to designating officers.
Most small corporations still use the traditional job descriptions. Most big corporations, on the other hand, use "C level" designations: the president becomes a CEO, or chief executive officer; the treasurer becomes a CFO, or chief financial officer, and so on. Many companies have scores of vice presidents, sometimes in several tiers: senior vice president, executive vice president, and so on.
Officers' authority and duties
Many people believe that corporate officers have a great deal of authority to negotiate on the corporation's behalf. In reality, this is often not the case. Officers are legal agents of the corporation and can only represent the corporation if the board of directors somehow allows them to do so. Their authority takes several flavors, listed below in descending order of potency:
- Express authority can come from several sources. In routine transactions, it comes from the bylaws of the corporation, which state the powers of each officer. For more extraordinary deals, express authority arises when the board of directors votes on a transaction, and then gives the officer a certified resolution authorizing them to enter the transaction.
- Authority by ratification arises when the officer enters into an unauthorized transaction, and the board accepts ("ratifies") the transaction afterwards.
- Implied authority arises when the board of directors does not explicitly authorize the transaction, but their acceptance of similar transactions in the past leads the other party to believe that the board has accepted the transaction in question.
- Apparent authority arises when an officer does not actually have authority, but the other party to the transaction reasonably believes they do have authority. There usually has to be some sort of action on the part of the corporation to give rise to apparent authority, but this can be as slight as not contesting the officer's claim of authority.
- Authority by estoppel arises when the other party to an unauthorized transaction has relied upon the representation of the officer, and cancelling the transaction would lead to unjust enrichment or another unfair result.
Like the board of directors, the officers have a fiduciary duty to the corporation, which consists of a duty of care (act in good faith and on an informed basis) and duty of loyalty (avoid conflicts of interest and resolve such conflicts as fairly as possible).