The highest-ranking operational decision maker within an organization.
Written bykyle peterdy
Updated on November 24, 2022
A Chief Executive Officer (CEO) is the highest-ranking individual employee within an organization. They are employees in the sense that they work for the company (rather than being chosen by the shareholders), but they are not ordinary employees; They have considerable responsibility and influence within the company.
That said, in organizations with a healthy corporate governance function, the CEO is also not an all-powerful leader with uncontrollable decision-making power and authority. The CEO reports directly to and is ultimately accountable to the company's Board of Directors (whose membersthey areelected by shareholders).
The specific responsibilities of a CEO may vary slightly from company to company, but in general, this person is responsible for the ultimate success or failure of the organization.
- The CEO is the highest ranking official in any organization; report to the Board of Directors.
- Key responsibilities include defining and executing the organization's strategy, allocating capital, and creating and supervising the executive team.
- CEOs must possess strong communication skills, great leadership acumen, and an unmatched passion for the organization and its people.
- Sometimes CEOs also serve as chairmen of the board of directors, but this can raise a potential conflict of interest.
Executive Director Responsibilities
A CEO can (in theory) take on any task or responsibility they want; in fact, some CEOs, particularly in smaller organizations, tend to be very hands-on in some corporate roles.
CEOs may gravitate toward certain roles, such as marketing or finance, based on their experience and professional experience. The stage of the company's life cycle is also important; For example, CEOs at early-stage companies may spend a greater proportion of their time raising funds than their counterparts at more mature companies.
In practice, however, a CEO's time and experience is better spent focusing on a handful of high-impact core responsibilities. These include:
1. Definition and execution of the organizational strategy
Decisions on new product lines, generation (and/or maintenance) of competitive advantages, new potential markets, risk mitigation or opportunity use (among others) are the responsibility of the General Manager.
As with anything in an organization, they will rely on considerable input and input from senior leaders, as well as guidance and insight from the Board of Directors, but the CEO is the person who has operational control over strategy and execution. .
2. Building the Senior Leadership Team
Effective CEOs can attract the best talent to their organizations. While they are not responsible for hiring or firing each individual employee, they arethey areResponsible for building and overseeing the executive leadership team who, in turn, hires and oversees senior and middle management within their divisions.
The executive leadership team includes the CFO (Chief Financial Officer), COO (Chief Operations Officer) and, depending on the nature of the organization, any other C-level positions that may exist (Chief Risk Officer, Chief Technology Officer, Chief Strategy Officer). , Director of Investments, etc.)
In many organizations, the Board will have final (formal) authority over hiring decisions at the C level, but in most cases, the Board actually follows through on the CEO's recommendations.
3. Make capital allocation decisions
While division and department managers may be responsible for managing their respective budgets, the responsibility for setting and managing the organization's overall budget to execute strategic initiatives effectively falls to the chief executive officer.
In addition, the CEO will also assess when (and how) to raise funds, as well as how to make the best use of excess capital. Strategies include paying down debt, distributing capital through dividends or buying back shares, or reinvesting in the business.
4. Definition of Vision, Values and Corporate Culture
Corporate culture has many elements that are organic in nature, but the mission, vision, and values conceived and implemented by the CEO will ultimately drive that culture in many different directions.
The CEO must be very aware of his tenor, his behavior, and every action he takes (or fails to take): the entire organization is watching. Even decisions about what they wear or how they choose to present themselves and engage with other members of the company will set the tone for the rest of the organization.
5. Effective communication with all stakeholders
The CEO is the face of the organization. They may represent the company to the general public, the press, legislators or other regulators, employees, customers, suppliers, or any other party with an interest in the company's operations.
Conveying the core elements of vision, values, and mission is important, but actually living those values is even more critical. The CEO is never really "off duty": someone is always watching or listening.
Characteristics of a successful CEO
As with anything, there is no one-size-fits-all formula. But successful CEOs often have (or exhibit) many of the following characteristics:
- extraordinary passion.It takes a special kind of leader to be able to handle the pressure and scrutiny that comes with such an important position.
- Clear vision.Developing a business strategy requires a CEO to be many steps ahead of the general public to see and understand how trends may evolve.
- Strong leadership.Even with unmatched passion and vision, the company can't get there without the right people to make things happen. CEOs must be able to attract talented human capital that supports the company's mission and vision.
- Effective communication skills.A CEO is always under scrutiny and must constantly convey and reinforce the organization's message. It's rare to see a CEO who isn't comfortable in front of an audience or a TV camera.
A typical organizational structure looks like this:
The CEO is the primary operational decision maker within an organization, but reports to the Board of Directors (BOD).
All appointments (or removals) of the BOD are voted on by the company's shareholders. Conceptually, this is what creates acorporate governancerole within an organization.
The BOD is a safeguard that provides a layer of protection for (and often seeks to) the rights and interests of interested parties. This ensures that the CEO, while a highly coveted position, does not have total dictatorial control over the entire company.
Fueled largely by the rise of, the nature of board oversight has evolved. While historically their sole responsibility was to look after shareholders (often referred to as shareholder primacy), boards are increasingly expected to address all stakeholders more broadly, including consumers, employees, suppliers and the general public.
CEO vs. The Chairman of the Board
The CEO is the main operator of the organization; In other words, they are responsible for thecompany. The Chairman of the Board of Directors, for his part, is responsible for thequadruple.
The General Manager is technically subordinate to the Chairman of the Board.
In some cases, the CEO also serves as the president. However, as scrutiny around corporate governance practices grows, many companies are moving away from this model.
Since the Board is responsible for evaluating the performance of the CEO, including voting on his compensation (and even his removal, if warranted), it is obvious that a potential conflict of interest exists when the CEOEsthe hip.
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