Chief Executive Officer

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Description of Chief Executive Officer. Explanation.

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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.

According to Porter and Nohria, CEOs must also excel in managing their scarce time. They operate under a lot of (time) pressure because they have to simultaneously manage no less than six dimensions of influence. Each of these 6 requires the ability to reconcile a challenging paradox (seeming contraction, duality), both in a strategic and in a day-to-day sense:


Influence of Chief Executive Officers


6 Dimensions of CEO Influence
Porter and Nohria 2018

DIRECT

The CEO is personally involved in numerous meetings and makes many decisions.

INDIRECT

The CEO also exerts a lot of indirect influence over others various using integrative mechanisms (e.g., strategy, business unit reviews, developing people and relationships, organizational structure, organizational culture).

INTERNAL

The CEO works with the top management team and with employees at all other levels inside the organization.

EXTERNAL

The CEO also meets with many external constituencies (board, shareholders, customers, media, government, etc.), serving as the face of the company, and brings these external perspectives to the organization.

PROACTIVE

The CEO articulates a sense of purpose, has a forward-looking vision, and leads the company to greater success.

REACTIVE

The CEO also responds to unfolding events, from daily issues to full-blown crises that may have a major impact on the companys success.

LEVERAGE

The CEO has a lot of clout due to his/her position and control of resources.

CONSTRAINTS

The CEO is constrained by the need to build buy-in, bring others along, and send the right message.

TANGIBLE

The CEO makes many decisions about concrete things like strategic direction, structure, resource allocation, and the selection of key people.

SYMBOLIC

The CEO also has exterts strong intangible and symbolic influence because his/her actions (intentionally or not) set the tone, communicate norms, shape values, and provide meaning.

POWER

The CEO holds formal power and authority in the company that is reinforced by his/her competence and track record.

LEGITIMACY

The CEO also has influence as a result of the legitimacy that comes from his/her character and the trust he/she earns from employees through his/her demonstrated values, fairness, and commitment to the organization.

Corporate Governance System and the CEO

  1. 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.
  2. 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.
  3. 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 skills and 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.
  • The presence of a Supervisory Board? If so, is the CEO also a member or even the chairman of it?
  • The personality and clout of the chairman versus 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.


Sources:

Article: Michael E. Porter and Nitin Nohria, "How CEOs Manage Time", HBR Jul-Aug 2018, pp.42-51


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2018 12manage - The Executive Fast Track. V14.1 - Last updated: 23-10-2018. All names of their owners.