Chief executive officer

Responsibilities

The responsibilities of an organization's CEO are set by the organization's board of directors or other authority, depending on the organization's structure. They can be far-reaching or quite limited, and are typically enshrined in a formal delegation of authority regarding business administration. Typically, responsibilities include being an active decision-maker on business strategy and other key policy issues, as well as leader, manager, and executor roles. The communicator role can involve speaking to the press and the public, as well as to the organization's management and employees. The decision-making role entails making high-level decisions regarding policy and strategy. The CEO is responsible for implementing the goals, targets, and strategic objectives as determined by the board of directors.

As an executive officer of the company, the CEO reports the status of the business to the board of directors, motivates employees, and drives change within the organization. As a manager, the CEO presides over the organization's day-to-day operations. The CEO is the person who is ultimately accountable for a company's business decisions, including those in operations, marketing, business development, finance, human resources, etc. The CEO of a political party is often entrusted with fundraising, particularly for election campaigns.

The use of the CEO title may be used by for-profit companies or non-profit or charitable organisations, such as the Wikimedia Foundation.

International use

In some countries, there is a dual board system with two separate boards, one executive board for the day-to-day business and one supervisory board for control purposes (selected by the shareholders). In these countries, the CEO presides over the executive board and the chairperson presides over the supervisory board, and these two roles will always be held by different people. This ensures a distinction between management by the executive board and governance by the supervisory board. This allows for clear lines of authority. The aim is to prevent a conflict of interest and too much power being concentrated in the hands of one person.

In the United States, the board of directors (elected by the shareholders) is often equivalent to the supervisory board, while the executive board may often be known as the executive committee (the division/subsidiary heads and C-level officers that report directly to the CEO).

In the United States, and in business, the executive officers are usually the top officers of a corporation, the chief executive officer (CEO) being the best-known type. The definition varies; for instance, the California Corporate Disclosure Act defines "executive officers" as the five most highly compensated officers not also sitting on the board of directors. In the case of a sole proprietorship, an executive officer is the sole proprietor. In the case of a partnership, an executive officer is a managing partner, senior partner, or administrative partner. In the case of a limited liability company, an executive officer is any member, manager, or officer.

Related positions

Depending on the organization, a CEO may have several subordinate executives to help run the day-to-day administration of the company, each of whom has specific functional responsibilities referred to as senior executives, executive officers, or corporate officers. Subordinate executives are given different titles in different organizations, but one common category of subordinate executive, if the CEO is also the president, is the vice president (VP). An organization may have more than one vice president, each tasked with a different area of responsibility (e.g., VP of finance, VP of human resources). Examples of subordinate executive officers who typically report to the CEO include the chief operating officer (COO), chief financial officer (CFO), chief strategy officer (CSO), chief marketing officer (CMO), and chief business officer (CBO). The public relations-focused position of chief reputation officer is sometimes included as one such subordinate executive officer, but, as suggested by Anthony Johndrow, CEO of Reputation Economy Advisors, it can also be seen as "simply another way to add emphasis to the role of a modern-day CEO – where they are both the external face of, and the driving force behind, an organization culture".

United Kingdom

In the UK, chief executive and chief executive officer are used in local government, where their position in law is described as the "head of paid service", and in business and in the charitable sector. As of 2013, the use of the term director for senior charity staff is deprecated to avoid confusion with the legal duties and responsibilities associated with being a charity director or trustee, which are normally non-executive (unpaid) roles. The term managing director is often used in lieu of chief executive officer.

United States

In the US, the term "chief executive officer" is used primarily in business, whereas the term "executive director" is used primarily in the not-for-profit sector. These terms are generally mutually exclusive and refer to distinct legal duties and responsibilities. The CEO is the highest-ranking executive in a company, making corporate decisions, managing operations, allocating resources, and being the main point of communication between the board of directors and the company.

Celebrity CEOs

Business publicists since the days of Edward Bernays (1891–1995) and his client John D. Rockefeller (1839–1937) and even more successfully the corporate publicists for Henry Ford, promoted the concept of the "celebrity CEO". Business journalists have often adopted this approach, which assumes that the corporate achievements, especially in the arena of manufacturing, are produced by uniquely talented individuals, especially the "heroic CEO". In effect, journalists celebrate a CEO who takes distinctive strategic actions. The model is the celebrity in entertainment, sports, and politics – compare the "great man theory". Guthey et al. argues that "...these individuals are not self-made, but rather are created by a process of widespread media exposure to the point that their actions, personalities, and even private lives function symbolically to represent significant dynamics and tensions prevalent in the contemporary business atmosphere". Journalism thereby exaggerates the importance of the CEO and tends to neglect harder-to-describe broader corporate factors. There is little attention to the intricately organized technical bureaucracy that actually does the work. Hubris sets in when the CEO internalizes the celebrity and becomes excessively self-confident in making complex decisions. There may be an emphasis on the sort of decisions that attract the celebrity journalists.

Research published in 2009 by Ulrike Malmendier and Geoffrey Tate indicates that "firms with award-winning CEOs subsequently underperform, in terms both of stock and of operating performance".

Criticism

CEO selection and performance evaluation

CEOs and senior executives are governed by the board of directors. The proper selection and evaluation of the CEO and the executive team is critical to the company’s performance. Yet there is no established standard framework to evaluate and govern the CEO performance. Aside from Sarbanes Oxley Act legal standard to govern the financial reporting of public companies and hold the CEO & CFO accountable, there are no industry standards to test the CEO competency and actions or to help align the performance of the executive team with the shareholders' interest and performance expectations. One initiative proposes a standardized questionnaire used in annual CEO reviews and senior executive recruitment. These questionnaires help guide CEO strategy and assure the shareholders that the company and its executive team are on the right track. According to the Executive Institute, the top 10 questions every board must ask its CEO, include the following:

• Are we in the right business/market segment(s)? What are the growth areas to invest in and loss areas to divest?
• What are the emerging PESTEL (Political, Economic, Societal, Technological, Environmental & Legal) risks and opportunities?
• What market data supports our strategy?
• What are our strengths, weaknesses, opportunities and threats (SWOTs)?
• What are we doing to address each one of the SWOTs?
• What are our core competencies? How we can leverage them better?
• What are the operational or execution risks, and how do you manage them?
• What are our key performance indicators (KPIs) and targets that help us measure our performance?
• How do you plan to achieve those targets and in what timeframe?
• How can we build a sustainable competitive advantage?

Every CEO and C-level executive must be able to provide specific answers to the preceding questions, readily and clearly. Additionally, these questions can also be used as a framework for evaluating potential candidates for the succession planning and selection process.

Executive compensation

Executive compensation has been a source of criticism following a dramatic rise in pay relative to the average worker's wage. For example, the relative pay was 20-to-1 in 1965 in the US, but had risen to 376-to-1 by 2000. The relative pay differs around the world, and, in some smaller countries, is still around 20-to-1. Observers differ as to whether the rise is due to competition for talent or due to lack of control by compensation committees. In recent years, investors have demanded more say over executive pay.

Diversity

Lack of diversity amongst chief executives has also been a source of criticism. In 2018, 5% of Fortune 500 CEOs were women. In 2023 the number rose to 10.4% of for Women CEO's of Fortune 500 companies. The reasons for this are explained or justified in various ways, and may include biological sex differences, male and female differences in Big Five personality traits and temperament, sex differences in psychology and interests, maternity and career breaks, hypergamy, phallogocentrism, the existence of old boy networks, tradition, and the lack of female role models in that regard. Some countries have passed laws mandating boardroom gender quotas. In 2023 Rockefeller Foundation awarded a grant to Korn Ferry to research strategies and then action a plan to help more women to become CEO's.

Toxic executives

There are contentious claims that a significant number of CEOs have psychopathic tendencies, often characterized by power-seeking behavior and dominance. These individuals can often conceal their ruthlessness and antisocial behavior behind a facade of charm and eloquence. Traits such as courage and risk-taking, generally considered desirable, are often found alongside these psychopathic tendencies.

Tara Swart, a neuroscientist at MIT Sloan School of Management, has suggested that individuals with psychopathic traits thrive in chaotic environments and are aware that others do not. As a result, they may intentionally create chaos in the workplace. This perspective is explored in the book Snakes in Suits, co-authored by Robert D. Hare.

However, Scott Lilienfeld has argued that the attention given to psychopathy in the workplace by both the media and scholars has far exceeded the available scientific evidence. Emilia Bunea, writing in Psychology Today, has linked psychopathic traits in managers to workplace bullying, employee dissatisfaction, and turnover intentions. Despite this, Bunea cautions that excessive worry about supposed psychopathic managers could discourage individuals from pursuing careers in corporations and deter employees from addressing issues with difficult bosses.

Controversies

There have been several notable controversies involving famous CEOs. Some of the most prominent controversies were a result of the MeToo Movement including Harvey Weinstein and the Weinstein Company, Steve Wynn and Wynn Resorts Ltd., and Leslie Moonves & CBS.

Elon Musk, the CEO of Tesla, Inc. and SpaceX, has been the subject of several controversies. In 2018, Musk tweeted "[a]m considering taking Tesla private at $420. Funding secured" in the middle of a trading day and a few weeks later, Tesla announced it would go private. The SEC investigated Musk shortly after his tweet and charged him with securities fraud. Musk settled the controversy and stepped down as chair of Tesla's board but remained the company's CEO. Musk and Tesla both paid a $20 million penalty to be distributed among harmed investors.