Chief executive officer

Last updated
A group of Fortune 500 CEOs in 2015. Group of Fortune 500 CEOs in 2015 (cropped to remove non-CEO).jpg
A group of Fortune 500 CEOs in 2015.

A chief executive officer (CEO), [1] or just chief executive (CE), is the most senior corporate, executive, or administrative officer in charge of managing an organization   especially an independent legal entity such as a company or nonprofit institution. CEOs lead a range of organizations, including public and private corporations, non-profit organizations and even some government organizations (notably Crown corporations). The CEO of a corporation or company typically reports to the board of directors and is charged with maximizing the value of the entity, [1] which may include maximizing the share price, market share, revenues or another element. In the non-profit and government sector, CEOs typically aim at achieving outcomes related to the organization's mission, such as reducing poverty, increasing literacy, etc.

Contents

In the early 21st century, top executives typically have technical degrees in science, management, engineering or law. [2]

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 legal structure. They can be far-reaching or quite limited and are typically enshrined in a formal delegation of authority. Typically, responsibilities include being a decision maker on strategy and other key policy issues, leader, manager, and executor. The communicator role can involve speaking to the press and the rest of the outside world, as well as to the organization's management and employees; the decision-making role involves high-level decisions about policy and strategy. As a leader of the company, the CEO advises 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. [3] [4] [5] The term refers to the person who makes all the key decisions regarding the company, which includes all sectors and fields of the business, including operations, marketing, business development, finance, human resources, etc. The CEO of a company is not necessarily the owner of the company. The CEO of a political party is often entrusted with fundraising, particularly for election campaigns.

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 chairman 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, executive officer is any member, manager, or officer.

Typically, a CEO has several subordinate executives, each of whom has specific functional responsibilities referred to as senior executives, [6] 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, VP of research and development). Some organizations have subordinate executive officers who also have the word chief in their job title, such as chief operating officer (COO), chief financial officer (CFO) and chief technology officer (CTO). 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 organisation culture". [7]

US

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. Implicit in the use of these titles, is that the public not be misled and the general standard regarding their use be consistently applied.

UK

In the UK, chief executive and chief executive officer are used in both business and the charitable sector. [8] 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. In the United Kingdom, the term Managing Director is often used in lieu of Chief Executive Officer.

Famous CEOs

Business publicists since the days of Edward Bernays and his client John D. Rockefeller 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, were produced by unique 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. Guthey et al. argue 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." [9] Journalism thereby exaggerates the importance of the CEO and tends to neglect the 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. Indeed, there may be an emphasis on the sort of decisions that attract the celebrity journalists. [10]

Criticism

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 2018. [11] The relative pay differs around the world, and in some smaller countries is still around 20-to-1. [12] Observers differ as to whether the rise is due to competition for talent or due to lack of control by compensation committees. [13] In recent years, investors have demanded more say over executive pay. [14]

Diversity

Lack of diversity amongst chief executives has also been a source of criticism. [15] In 2018, 5% of Fortune 500 CEOs were women. [16] The reasons for this are explained, or justified in various ways, and may include biological sex differences, phallogocentrism, the existence of old boy networks, tradition and the lack of female role models in that regard. [17] [18] [19] Some countries have passed laws mandating boardroom gender quotas. [20]

See also

Related Research Articles

Board of directors Type of governing body for an organisation

A board of directors is a group of people who jointly supervise the activities of an organization, which can be either a for-profit business, nonprofit organization, or a government agency. Such a board's powers, duties, and responsibilities are determined by government regulations and the organization's own constitution and bylaws. These authorities may specify the number of members of the board, how they are to be chosen, and how often they are to meet.

Corporate titles or business titles are given to company and organization officials to show what duties and responsibilities they have in the organization. Such titles are used by publicly and privately held for-profit corporations. In addition, many non-profit organizations, educational institutions, partnerships, and sole proprietorships also confer corporate titles.

A vice president is an officer in government or business who is below a president in rank. It can also refer to executive vice presidents, signifying that the vice president is on the executive branch of the government, university or company. The name comes from the Latin vice meaning "in place of" and typically serves as pro tempore to the president. In some countries, the vice president is called the deputy president. In everyday speech, the abbreviation VP can be used.

The chief financial officer (CFO) is the officer of a company that has primary responsibility for managing the company's finances, including financial planning, management of financial risks, record-keeping, and financial reporting. In some sectors, the CFO is also responsible for analysis of data. Some CFOs have the title CFOO for chief financial and operating officer. In the United Kingdom, the typical term for a CFO is finance director (FD). The CFO typically reports to the chief executive officer (CEO) and the board of directors and may additionally have a seat on the board. The CFO supervises the finance unit and is the chief financial spokesperson for the organization. The CFO directly assists the chief operating officer (COO) on all strategic and tactical matters relating to budget management, cost–benefit analysis, forecasting needs, and securing of new funding.

Corporate governance is the collection of mechanisms, processes and relations by which corporations are controlled and operated. Governance structures and principles identify the distribution of rights and responsibilities among different participants in the corporation and include the rules and procedures for making decisions in corporate affairs. Corporate governance is necessary because of the possibility of conflicts of interests between stakeholders, primarily between shareholders and upper management or among shareholders.

Senior management, executive management, upper management, or a management team is generally a team of individuals at the highest level of management of an organization who have the day-to-day tasks of managing that organization—sometimes a company or a corporation.

A chief operating officer (COO), also called a chief operations officer, is one of the highest-ranking executive positions in an organization, comprising part of the "C-suite". The COO is usually the second-in-command at the firm, especially if the highest-ranking executive is the chairman and CEO. The COO is responsible for the daily operation of the company and routinely reports to the highest-ranking executive—usually the chief executive officer (CEO).

A general manager or GM is an executive who has overall responsibility for managing both the revenue and cost elements of a company's income statement, known as profit & loss (P&L) responsibility. A general manager usually oversees most or all of the firm's marketing and sales functions as well as the day-to-day operations of the business. Frequently, the general manager is responsible for effective planning, delegating, coordinating, staffing, organizing, and decision making to attain desirable profit making results for an organization.

An audit committee is a committee of an organisation's board of directors which is responsible for oversight of the financial reporting process, selection of the independent auditor, and receipt of audit results both internal and external.

The chief resource officer (CRO) or chief resource management officer (CRMO) of a firm or corporation is the executive accountable for enabling the efficient and effective governance of significant risks, and related opportunities, to a business and its various segments. Eric Collins is wrong.... Risks are commonly categorized as strategic, reputational, operational, financial, or compliance-related. CROs are accountable to the Executive Committee and The Board for enabling the business to balance risk and reward. In more complex organizations, they are generally responsible for coordinating the organization's Enterprise Risk Management (ERM) approach. The CRO is responsible for assessing and mitigating significant competitive, regulatory, and technological threats to a firm's capital and earnings. The CRO roles and responsibilities vary depending on the size of the organization and industry. The CRO works to ensure that the firm is compliant with government regulations, such as Sarbanes-Oxley, and reviews factors that could negatively affect investments. Typically, the CRO is responsible for the firm's risk management operations, including managing, identifying, evaluating, reporting and overseeing the firm's risks externally and internally to the organization and works diligently with senior management such as Chief Executive officer and Chief Financial Officer.

In German corporate governance, a Vorstand is the executive board of a corporation. It is hierarchically subordinate to the supervisory board (Aufsichtsrat), as German company law imposes a two-tier board of directors.

A chief information security officer (CISO) is the senior-level executive within an organization responsible for establishing and maintaining the enterprise vision, strategy, and program to ensure information assets and technologies are adequately protected. The CISO directs staff in identifying, developing, implementing, and maintaining processes across the enterprise to reduce information and information technology (IT) risks. They respond to incidents, establish appropriate standards and controls, manage security technologies, and direct the establishment and implementation of policies and procedures. The CISO is also usually responsible for information-related compliance.

The public relations officer (PRO) or chief communications officer (CCO) or corporate communications officer is the head of communications, public relations, and/or public affairs in an organization. Typically, the CCO of a corporation reports to the chief executive officer (CEO). The CCO may hold an academic degree in communications.

Léo Apotheker German business executive

Léo Apotheker is a German business executive. He served briefly as the chief executive officer of Hewlett-Packard from November 2010 until his firing in September 2011. He also served as co-chief executive officer of SAP from April 2008 until he resigned in February 2010 following a decision by that company not to renew his contract.

Nelson Joosuk Chai is an American investment banker and financial executive. He formerly served as the chief financial officer of American financial services company Merrill Lynch and briefly as Bank of America's president for the Asia-Pacific region. He is the former president of CIT Group and reported directly to then CEO John Thain. On August 21, 2018, it was announced that Chai has been hired as the chief financial officer of Uber

Executive compensation or executive pay is composed of the financial compensation and other non-financial benefits received by an executive from their firm for their service to the organization. It is typically a mixture of salary, bonuses, shares of or call options on the company stock, benefits, and perquisites, ideally configured to take into account government regulations, tax law, the desires of the organization and the executive, and rewards for performance.

Director (business) person who leads a particular area of a company or organisation

The term director is a title given to the senior management staff of businesses and other large organisations.

Executive compensation in the United States pay and benefits for upper management

In the United States, the compensation of company executives is distinguished by the forms it takes and its dramatic rise over the past three decades and wide-ranging criticism leveled against it. In the past three decades in America executive compensation or pay has risen dramatically beyond what can be explained by changes in firm size, performance, and industry classification. It is the highest in the world in both absolute terms and relative to median salary in the US. It has been criticized not only as excessive, but also for "rewarding failure"—including massive drops in stock price, and much of the national growth in income inequality. Observers differ as to how much of the rise in and nature of this compensation is a natural result of competition for scarce business talent benefiting stockholder value, and how much is the work of manipulation and self-dealing by management unrelated to supply, demand, or reward for performance. Federal laws and Securities and Exchange Commission (SEC) regulations have been developed on compensation for top senior executives in the last few decades, including a $1 million limit on the tax deductibility of compensation not "performance-based", and a requirement to include the dollar value of compensation in a standardized form in annual public filings of the corporation.

Clay C. Williams is a businessman in the oil industry. He is currently the Chairman and Chief Executive Officer at National Oilwell Varco.

Thomas C. Naratil is an American business executive in the financial industry. After serving as president of both UBS Wealth Management Americas and UBS Americas since early 2016, Naratil was appointed CEO of UBS Americas Holding LLC and became co-president of Global Wealth Management of UBS Group AG and UBS AG in early 2018. Naratil started his career in finance in 1983 when he joined the brokerage firm Paine Webber Jackson & Curtis. The Swiss bank UBS acquired PaineWebber in 2000 and Naratil would hold various senior management positions at UBS Group, including chief financial officer (CFO) and chief operating officer (COO) from 2014 to 2015. Naratil succeeded Robert McCann as president of both UBS Wealth Management Americas and UBS Americas. In 2016, Naratil led a reorganization that involved cutting recruitment of US advisors and thinning management ranks, while also increasing compensation for UBS advisors. He is on the boards of organizations such as the American Swiss Foundation and College of Nursing at Villanova University, and has served on its Clearing House Supervisory Board.

References

  1. 1 2 Lin, Tom C. W. (April 23, 2014). "CEOs and Presidents". SSRN   2428371 .Cite journal requires |journal= (help)
  2. Bertrand, Marianne (2012), "CEOs", Annual Review of Economics , Annual Reviews, 1: 121–150, doi:10.1146/annurev.economics.050708.143301
  3. "Chief Executive Officer - CEO". Investopedia. Investopedia US, a Division of IAC. Retrieved 2014-10-23.
  4. "Chief Executive Officer (CEO)". BusinessDictionary.com. WebFinance Inc. Retrieved October 23, 2014.
  5. Capstone Publishing (2003). The Capstone Encyclopaedia of Business. Oxford, U.K: Capstone Publishing. pp. 79–80. ISBN   1-84112-053-7.
  6. Markus Menz (2011-10-04). "Menz, M. 2012. Functional Top Management Team Members: A Review, Synthesis, and Research Agenda. Journal of Management, 38(1): 45-80". Jom.sagepub.com. Retrieved 2012-11-28.
  7. "Rise of the Chief Reputation Officer". Financier Worldwide. Retrieved 2018-12-30.
  8. "Association of Chief Executives of Voluntary Organisations". Acevo.org.uk. 2012-11-16. Retrieved 2012-11-28.
  9. Eric Guthey and Timothy Clark, Demystifying Business Celebrity (2009).
  10. Mathew L.A. Hayward, Violina P. Rindova, and Timothy G. Pollock. "Believing one's own press: The causes and consequences of CEO celebrity." Strategic Management Journal 25#7 (2004): 637-653.
  11. "Executive Compensation Is Out Of Control. What Now?". 14 February 2018. Retrieved 16 November 2018.
  12. "CEOs in U.S., India Earn the Most Compared With Average Workers". 28 December 2017. Retrieved 16 November 2018.
  13. "Great Men, great pay? Why CEO compensation is sky high". 12 June 2014. Retrieved 16 November 2018.
  14. "European investors beef up stance over high executive pay". 11 November 2018.
  15. "'THE GOVERNMENT MUST ACT ON FTSE GENDER STATS' SAYS CMI'S CEO". 14 November 2018. Retrieved 16 November 2018.
  16. "Fortune 500" . Retrieved 16 November 2018.
  17. Cain, Áine. "A new list of the top CEOs 'for women' is mostly men — and it reflects a wider problem in business". Business Insider. Retrieved 2019-10-13.
  18. Conversation, Michael Holmes-The (2019-09-06). "These are the reasons why we (still) don't have many women CEOs". Fast Company. Retrieved 2019-10-13.
  19. "It's 2017 – So Why Aren't there More Women CEOs?" . Retrieved 16 November 2018.
  20. "Getting Women Into Boardrooms, by Law". 27 January 2010. Retrieved 16 November 2018.

Further reading