What is a CEO (Chief Executive Officer)?

A CEO, which stands for Chief Executive Officer, is the highest-ranking individual in a company or organization, serving under the mandate of the Share Holders elected Board of Directors. The CEO is responsible for the overall success of a business entity or other organization and for making top-level managerial decisions that are in alignments with the board of directors' mandates.

The board of directors may ask for input on major decisions, as they are the ultimate authority in making final decisions, but CEO has to be able to make these decisions independantly should he need to and take the consequinces for it should they not align with the wishes of the board or should they hurt the company. In fact CEO position is the most challenging position within any organisation. A good CEO will always seek to understand the asperations of his board of directors and then make the best decisions for the company directed by those asperations. CEOs should never make reckless decisions. There are other titles for CEOs, such as chief executive, president, and managing director.

Roles and Responsibilities of the CEO

In addition to the overall success of an organization or company, the CEO is responsible for leading the development and execution of long-term strategies, with the goal of increasing shareholder value.

The roles and responsibilities of a CEO vary from one company to another, often depending on the organizational structure and/or size of the company. In smaller companies, the CEO takes on a more “hands-on role”, such as making lower-level business decisions (e.g., hiring of staff). In larger companies, he or she usually only deals with high-level corporate strategy and major company decisions. Other tasks are delegated to managers or departments.

There is no standardized list of the roles and responsibilities of a chief executive officer. The typical duties, responsibilities, and job description of a CEO include:

  1. Communicating, on behalf of the company, with shareholders, government entities, and the public
  2. Leading the development of the company’s short- and long-term strategy
  3. Creating and implementing the company or organization’s vision and mission
  4. Evaluating the work of other executive leaders within the company, including directors, vice presidents, and presidents
  5. Maintaining awareness of the competitive market landscape, expansion opportunities, industry developments, etc.
  6. Ensuring that the company maintains high social responsibility wherever it does business
  7. Assessing risks to the company and ensuring they are monitored and minimized
  8. Setting strategic goals and making sure they are measurable and describable

Basic Corporate Structure of a Company

To look after the interests of shareholders, many firms adopt a two-tier corporate hierarchy – the first tier being the Board of Directors and the second tier being the company’s upper management (COO, CEO, CFO).

Elected by shareholders are the Board of Directors – the ultimate governing authority of the company. The Board of Directors selects the Chairperson and CEO. With the recommendation of the CEO, the Board of Directors also elects the COO – Chief Operating Officer – and CFO – Chief Financial Officer.

Org Chart for the CEO, Board, and Shareholders

The Difference Between a CEO and Chairperson of the Board

There should not be any confusion between the role of a CEO and that of a Chairperson of the Board. The CEO is the top operational decision-maker at a company, while the Chairperson of the Board is responsible for protecting the investors’ interests and for overseeing the company as a whole. The Board of Directors usually meets several times a year to set the company’s long-term goals, review financial results, evaluate the performance of executives and managers, and vote on strategic decisions proposed by the chief executive.

The Chairperson of the Board is technically superior to the Chief Executive Officer, as he or she cannot make major moves without the approval of the board. The chairperson could essentially become the ultimate boss of the company or organization. However, this is rare, as most board chairpersons are not so directly involved in day-to-day business operations, leaving the CEO with flexibility in running the company.

Reasons to Separate the CEO and Chairperson Positions

In some cases, the position of Chief Executive Officer and Chairperson of the Board are held by the same person. Most organizations and companies permit the Chief Executive Officer to become the chairperson, which can cause conflict of interest problems.

The two examples below show how a conflict of interest problem can arise if both positions are held by the same person:

  • The Board of Directors votes on increasing executive pay. If the Chief Executive Officer is also the chairperson, a conflict of interest arises because he would be voting on her/his own compensation.
  • The Board of Directors is responsible for evaluating the performance of executives such as the CEO. If the Chief Executive Officer also holds the position of Chairperson, she or he exercises the power to decide if her/his performance is satisfactory.

Therefore, good corporate governance usually prescribes a separation of duties between the Chief Executive Officer and the Chairperson of the Board. In the UK and other countries, it is forbidden by law for the CEO and Chairman of the Board to be the same person.

More Senior Management Career Resources

If you enjoyed this guide on “What does a CIO do?”, then you will likely find value in many of our other articles.  Our career resources section contains a lot of helpful information, including:

Corporate structure

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