Chief Executive Officer

Description of Chief Executive Officer. Explanation.

Duties of a Chief Executive Officer. Responsibilities.

The Chief Executive Officer (CEO) is the highest ranked manager of a corporation. He (or she) is primarily responsible to carry out the strategic plans and policies as established by the Board of Directors ('the Board') of which he is the chairman. He runs the corporation at the highest level. A CEO of a large corporation has without a doubt one of the most complex and demanding jobs that exist.

A CEO job description typically involves overseeing highly related and complex activities and issues such as the Corporate Mission, the Corporate Purpose, the Strategic Vision, the Corporate Strategy, and the Corporate Reputation.

Often he also deals with Investor Relations and Stakeholder Management at the highest level.

Furthermore he is involved in hiring, firing the senior management team, which in turn hire, fire, and lead the rest of the organization.

Last but not least he is also responsible for informing the Board about significant issues. He may or may not also hold the title of Chairman of the Supervisory Board (in case of a two-tier system, see below).

Skills of Chief Executive Officer

The CEO is a strategic thinker and should have a clear vision of the future of the corporation and the industries it is operating in.

Because he acts as the face of the corporation, the CEO is typically a very good communicator and an empathic and collaborative person. He needs to have the ability to establish and maintain loyalty (board, senior managers, employees) and trust (public, shareholders, etc.) in the company.

Corporate Governance System and the CEO

Compulsory one-tier system: In countries with a one-tier board structure (USA, UK, Ireland, Canada, Spain, Japan) the CEO normally also holds the position of Chairman of the Board. He then heads the (combined) Board of Directors.
Compulsory two-tier system: In case of a two-tier board structure (Germany, Austria) there are two boards: the Board of Directors and the Supervisory Board. In this corporate governance system, the CEO is only the chairman of the Board of Directors, but not of the Supervisory Board. There is a formal division of power. Italy and Portugal require a Board of Auditors separate from the board.
Choice: In many other countries (France, Belgium, The Netherlands, Luxembourg, Greece, Italy, Denmark, Finland, Slovenia, Bulgaria, Hungary) there is a choice for a one- or two tier board structure.

Besides 1 or 2-tier, there are many more ways in which the type of corporate governance influences the role and position of the CEO. More on Corporate Governance.

Power of the CEO

Besides the mentioned one- or two-tier board structure, the power and authority of the CEO depends on a number of additional factors including:

The composition of the Board of Directors and the roles, responsibilities and voting rights of the CEO and other members.
is there also a Supervisory Board? If yes, is the CEO also a member or even the chairman of it?
The personality and clout of the chairman and the CEO. Compare: Charismatic Leadership
The culture or climate of board meetings.
The boards' level of participation in the selection of the CEO and of the other top managers.
The board's ability to shape, monitor and/or control the implementation of the strategy.

Leadership

Some CEOs, such as GE's Jack Welch have been almost almighty and became cultural hero's during the stock boom of the 90s. But after the reports on accounting fraud and the executive incentives scandals at the end of the first Internet boom, many CEOs adopted a more careful, consensus-building attitude and avoid unnecessary media contacts.

Chief Executive Officer Forum (7)

Is There Such Thing as an Optimal CEO Tenure?
"In an interesting article "Long CEO Tenure Can Hurt Performance" (HBR March 2013) by Professor Xueming Luo, Vamsi K, Kanuri and Michelle Andrews results are disclosed from a study the authors did among 356 US companies between 2000 to 2010 analyzing the correlation between CEO tenure (~length of time serving in position of responsibility) and total shareholder returns.
The researchers found that CEOs create most shareholder value in their first years and argue this due to 2 factors:
- The firm-employee dynamic - This keeps improving the longer a CEO serves, growing shareholder value.
- The firm-customer dynamic - This strengthens only for a time and then weakens.
The optimal length of time served reported (for this group of companies in this period!) was actually 4,8 years...
Boards are advised to stimulate long-tenured CEO to keep spending a lot of time and effort on the firm-client relationship. To achive this, incentives plans for such leaders should focus heavily on consumer and market results. This will keep CEOs focused on understanding and learning client and market dynamics."

IOTA, the Multiplier Formula of the Chief Executive Officer
"To have positive and profitable effects on the organization, the CEO must seek for IOTA, where:
I = Intelligence,
O = Objectivity,
T = Transformational spirit, and
A= Authenticity.
As a result he’ll generate multiple multipliers for the organization."

The Tasks of a Chief Executive Officer
"The role of CEO lies with the responsibilities and authorities given to him by the owners / board of directors / shareholders.
It is like sailing a ship on the sea. He has to manage his resources, motivate and lead his team to win the odd circumstances. His role is not only to push the strategic vision but also co-ordinate with top and bottom levels and direct the actions and plan strategies in advance. He must bring change in employees attitude to achieve the difficult target and create win-win situations.
Ultimately he is responsible for failure or success of an organization."

Competencies of Chief Executive Officer
"What would be positive competencies necessary for CEOs?
Are these competencies effective in different regions, cultures and businesses?"

What is an Executive Director?
"In the hierachy of the structure, where does the executive director play - From where are his/her roles and power derived? Does the executive director report to the CEO or to the board?"

Chairman of the Board vs Chief Executive Officer
"Does the CEO work for the Chairman of the Board and does the Chairman have the right to fire the CEO?"