A Chief Executive Officer (CEO) holds the top most position in a company who is responsible for overall administrative, managerial, operational, strategic and financial performance and growth of the company. The CEO makes strategic decisions, manages and allocates resources, and charts future direction of a company.
In big companies, a CEO is answerable to the board of directors and communicates performance and operations of the company. Usually the CEO also holds a position as member of the board. Sometimes president, managing or executive director can also be the CEO of an organization.
The equivalent term for CEO in a non-profit company is executive director whereas the words managing partner, administrative partner, or senior partner are used for partnership firms. In Limited Liability Company, the equivalent term is executive officer, while the word owner is usually used for sole proprietorship.
Roles and Responsibilities of CEO
CEO plays a critical role in growth of a company. Without able leaders at its helm, a company will find it difficult to compete and survive for long. A good CEO is visionary who knows what steps to take now to improve and/or maintain its competitive position in the future.
The exact responsibilities of CEO vary from one company to the next. The CEO usually plays a hands-on role in smaller companies making both strategic and operational decisions. In small companies, the CEO makes investment as well as hiring decisions.
In larger corporations, on the other hand, the CEO usually deals with strategic decisions and directs future direction of the company. Most of the operational level decisions are delegated to middle and low level managers. The CEO is responsible for setting strategy and policies, developing culture of the company, leading senior executive team members, and prioritizing allocation of funds.
The CEO gets advice and ideas from the team members and then makes decisions based on the input of the team. However, in the end it is the CEO who is responsible for the performance of the company. In large companies, the CEO may be asked by the board of directors to step down if he or she is not able to improve financial position of the company.
Further Reading
- Endogeneity in CEO power: A survey and experiment – www.tandfonline.com [PDF]
- Behavioral consistency in corporate finance: CEO personal and corporate leverage – www.sciencedirect.com [PDF]
- Institutional ownership, CEO incentives, and firm value. – elibrary.ru [PDF]
- CEO overconfidence and innovation – pubsonline.informs.org [PDF]
- Innovation Activities in Chinese Manufacturing Firms: The Roles of Firm Ownership and CEO Incentives [J] – en.cnki.com.cn [PDF]
- Powerful CEOs and capital structure decisions: evidence from the CEO pay slice (CPS) – www.tandfonline.com [PDF]
- CEO Stock Incentives, Earnings Management and Corporate Governance [J] – en.cnki.com.cn [PDF]
- Does overconfidence affect corporate investment? CEO overconfidence measures revisited – onlinelibrary.wiley.com [PDF]
- Who makes acquisitions? CEO overconfidence and the market's reaction – www.sciencedirect.com [PDF]
