The Chief Executive Officer
The Chief Executive Officer
A CEO, which stands for Chief Executive Officer, is the highest-ranking individual in a company or organization. The CEO is responsible for the overall success of an organization and for making top-level managerial decisions. They can ask for input on major decisions but is the ultimate authority in making the final decisions in a company. There are other titles for CEOs such as chief executive, president, and managing director.
The Chief Executive Officer reports directly to and is accountable to the board of directors for the performance of the company. The board of directors (BoD) is a group of individuals who are elected to represent shareholders of the company or organization. The CEO often sits on the board and in some cases, she or he is the chairperson.
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 depending on the organizational structure and the size of the company. In smaller companies, the CEO takes on a more “hands-on role” such as making lower-level business decisions (i.e. the hiring of staff). In larger companies, she usually only deals with high-level corporate strategy and decisions as other tasks are given to other departments or managers.
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:
To look after the interests of shareholders, many firms adopt a two-tier corporate hierarchy. The first being the Board of Directors and the second tier being the 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 and CFO.
There should not be any confusion between the role of a CEO with that of a Chairperson of the Board. The CEO is the top decision-maker at a company while the Chairperson of the Board is responsible for protecting the investors’ interests such as profitability and stability, and 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 chairpeople are not so involved, leaving the CEO with flexibility in running the company.
In some cases, the position of Chief Executive Officer and Chairperson of the Board is held by the same person. Most organizations and companies permit the Chief Executive Officer to become the chairperson, which can cause a 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:
Therefore, good corporate governance usually prescribes a separation of duties between the Chief Executive Officer and the Chairperson of the Board.
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