Chief executive officer

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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.

The 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.

An executive officer (CCE) is generally a person responsible for running an organization, although the exact nature of the role varies depending on the organization. In many militaries, an executive officer, or "XO", is the second-in-command, reporting to the commanding officer. The XO is typically responsible for the management of day-to-day activities, freeing the commander to concentrate on strategy and planning the unit's next move.

Organization Social entity established to meet needs or pursue goals

An organization or organisation is an entity comprising multiple people, such as an institution or an association, that has a particular purpose.

A company, abbreviated as co., is a legal entity made up of an association of people, be they natural, legal, or a mixture of both, for carrying on a commercial or industrial enterprise. Company members share a common purpose, and unite to focus their various talents and organize their collectively available skills or resources to achieve specific, declared goals. Companies take various forms, such as:

Contents

In the early 21st century, top executives typically had technical degrees in science, 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.

Board of directors Board composed of directors

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.

Leadership ability of an individual or organization to guide other individuals, teams, or entire organizations

Leadership is both a research area and a practical skill encompassing the ability of an individual or organization to "lead" or guide other individuals, teams, or entire organizations. Specialist literature debates various viewpoints, contrasting Eastern and Western approaches to leadership, and also United States versus European approaches. U.S. academic environments define leadership as "a process of social influence in which a person can enlist the aid and support of others in the accomplishment of a common task".

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.

Dual board

A Dual Board or Two Tier system is a corporate structure system that consists of two separate Boards of directors that govern a corporation. The roles and relationships between the two boards vary across countries. The structure is composed of two boards, the "Management Board", and the "Supervisory Board" each of these have different roles.

A supervisory board or supervisory committee, often called board of directors, is a group of individuals chosen by the stockholders of a company to promote their interests through the governance of the company and to hire and supervise the executive directors and CEO.

Management Coordinating the efforts of people

Management is the administration of an organization, whether it is a business, a not-for-profit organization, or government body. Management includes the activities of setting the strategy of an organization and coordinating the efforts of its employees to accomplish its objectives through the application of available resources, such as financial, natural, technological, and human resources. The term "management" may also refer to those people who manage an organization.

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).

A shareholder is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders may be referred to as members of a corporation. Legally, a person is not a shareholder in a corporation until their name and other details are entered in the corporation's register of shareholders or members.

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.

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]

Finance Academic discipline studying businesses and investments

Finance is a field that is concerned with the allocation (investment) of assets and liabilities over space and time, often under conditions of risk or uncertainty. Finance can also be defined as the art of money management. Participants in the market aim to price assets based on their risk level, fundamental value, and their expected rate of return. Finance can be split into three sub-categories: public finance, corporate finance and personal finance.

Human resources are the people who make up the workforce of an organization, business sector, or economy. "Human capital" is sometimes used synonymously with "human resources", although human capital typically refers to a narrower effect. Likewise, other terms sometimes used include manpower, talent, labour, personnel, or simply people.

Research and development General term for activities in connection with corporate or governmental innovation

Research and development, known in Europe as research and technological development (RTD), refers to innovative activities undertaken by corporations or governments in developing new services or products, or improving existing services or products. Research and development constitutes the first stage of development of a potential new service or the production process.

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 director is used instead of chief 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 multi factorial, and may include natural sex differences, the existence of old boy networks and the lack of female role models. [17] Some countries have passed laws mandating boardroom gender quotas. [18]

See also

Related Research Articles

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". 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.

The chief operating officer (COO), also called the chief operations officer, is one of the highest-ranking executive positions in an organization, comprising part of the "C-Suite". 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.

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.

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.

A chief strategy officer (CSO), or chief strategist, is an executive responsible for assisting the chief executive officer (CEO) with developing, communicating, executing, and sustaining corporate strategic initiatives. Some companies give the title Chief Business Officer to its senior executives who are holding the top strategy role.

Executive compensation or executive pay is composed of the financial compensation and other non-financial awards 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.

Alfonso de Angoitia Mexican businessperson

Alfonso de Angoitia is co-CEO of Grupo Televisa, S.A., one of the main cable TV operators in Mexico, the leading satellite pay television system in the country, and the leading media company in the Spanish-speaking world.

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

A director is a person from a group of managers who leads or supervises a particular area of a company. Companies that use this term often have many directors spread throughout different business functions or roles. The director usually reports directly to a vice president or to the CEO directly in order to let them know the progress of the organization. Large organizations also sometimes have assistant directors or deputy directors. Director commonly refers to the lowest level of executive in an organization, but many large companies use the title of associate director more frequently. An executive director is roughly equivalent to Vice President or Senior director in some businesses. Some companies also have regional directors and area directors. Regional directors are present in companies that are organized by location and have their departments under that. They are responsible for the operations for their particular country. Though directors are the first stage in the executive team, area directors are seen as higher up, based on their area of control.

Executive compensation in the United States

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.

James R. Verrier was the chief executive officer at automotive industry component supplier BorgWarner from 2013-2018. In 2017 the company estimated his pay package to be worth about $10 million.

Karl-Ludwig Kley German manager

Karl-Ludwig Kley is a German business executive, and was the chief executive officer (CEO) and chairman of the executive board of the German multinational chemical, pharmaceutical and life sciences company Merck.

Dean A. Connor

Dean A. Connor is President and Chief Executive Officer of Sun Life Financial, an international financial services organization. Sun Life is based in Toronto, Ontario, Canada and has operations in 26 countries. It provides a range of insurance, wealth and asset management solutions to individuals and corporate Clients.

References

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  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. "It's 2017 – So Why Aren't there More Women CEOs?" . Retrieved 16 November 2018.
  18. "Getting Women Into Boardrooms, by Law". 27 January 2010. Retrieved 16 November 2018.

Further reading