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 a business entity or other organization and for making top-level managerial decisions. They may ask for input on major decisions but they are the ultimate authority in making final decisions. 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 a company. The board of directors (BoD) is a group of individuals who are elected to represent the shareholders of the company. 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, 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, she usually only deals with high-level corporate strategy and major company decisions. Other tasks are delegated to other 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:
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.
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.
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:
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.
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