What is a CEO? A complete guide with meaning, role, and responsibilities

When you think of "CEO", you likely envision a figure with immense responsibilities, powers, and the highest managerial role. In part, this is the case, but the role of the CEO, as well as his qualifications and peculiarities, is not always clear. In this article, we’ll delineate everything to know about the CEO.

CEO is the English acronym for Chief Executive Officer. It is a central figure, for leadership and strategy, in all businesses, from big to small. But who is the CEO and what does he do operationally within a company? Why does he receive such a high salary? Let’s discover together the importance of the role of the CEO and what type of figure he is.

What does CEO mean?

The CEO is the highest executive role held within a company.

However, this simple description does not do justice to the complexity and importance of the role. The CEO is the main executive of the company, the focal point of strategic decisions, and the driving force of the entire organization. One of the primary responsibilities is making major and delicate corporate decisions, which carry significant weight in overall operations. On the other hand, the CEO is responsible for defining and implementing the company’s strategy.

In short, the figure of the CEO is always the same, but tasks and operations can vary based on individual conditions.
Other related acronyms include COO (Chief Operating Officer) and CFO (Chief Financial Officer), each with specific responsibilities within the company structure, as we will see later.

Qualifications and responsibilities of the CEO

The CEO is crucial to the functioning and development of any business. When it comes to corporate decisions we are talking about important, often life-making choices, upon which the active interest in the company’s resources (human and economic) rests.

Very often the CEO imposes his presence within the company management committee, and it is not uncommon for him or her to also have the role of president at the same time.

The CEO is appointed by the board of directors or by the company’s shareholders. This appointment is usually based on the managerial skills, experience, and strategic vision of the potential CEO, as well as depending on the objectives and needs of the company itself.

The responsibilities of a CEO are very broad and include:

• the definition of the company strategy;
• monitoring financial performance;
• human resources management;
• the negotiation of key agreements;
• the legal representation of the company.

Furthermore, the CEO must ensure compliance with legal and regulatory regulations, as well as the creation of value for shareholders. But defining who the CEO is is not always easy.
The CEO sets the tone and vision that his company will follow and, as a result, very often also becomes a famous person. Think of Mark Zuckerberg, CEO of Facebook, or the revolutionary founder and CEO of Apple Steve Jobs.

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What does the CEO do: role, tasks, and functions

As already seen, the meaning of CEO is also often attributed to other titles, including president, executive and also managing director or advisor. The role of the CEO varies from one company to another and depends on the structure, size, and organization of the company.

In relatively small companies, the CEO often has a more obvious management role within the company and can make many of the company’s business decisions, even those considered "inferior", such as, for example, hiring new staff.

In larger companies, however, the meaning of CEO changes. In this context, the CEO deals exclusively with higher-level decisions regarding company strategy and its overall growth. The other decisions are, however, delegated to the various departments of which the company is made.

The CEO performs a number of critical tasks to ensure the success and growth of the company. These, in most cases, include:

• the definition of short and long-term company objectives, establishing a clear direction for the future;
• human resources management, which in larger companies can mean exclusively delegating to a specific department, while in smaller ones, as we have mentioned, it can mean doing the selection and training yourself.
• the identification of market opportunities;
• the management of relationships with stakeholders, such as investors, customers, and suppliers, ensuring effective communication and constructive collaboration;
• the supervision of operations, ensuring that they comply with quality standards and current regulations;
• financial resource management, such as budget planning, spending and cash flow and financial risk assessment.

But does the CEO do all this alone? It depends on the size of the company and the figures expected by the organization itself. Where present, the CEO works closely with other executives, such as the CFO for finance, the CTO for information technology, and the COO for business operations.

CEO, CTO, CFO, and President: acronyms and terminologies compared

We understand that the CEO stands for Chief Executive Officer, but it is not always easy to identify the different roles, as well as responsibilities, within individual companies. In more structured companies, the CEO can be supported by a COO, for the operational part, and by a CFO, for the financial part. Then there could also be a CTO, a sort of technical manager. They all refer in some way to the CEO, who nevertheless remains the highest leadership figure. And who is the President? Let’s try to go into detail.

The difference between CEO and President

While the CEO directs the operational aspects of a company, the committee, or board oversees it, and the leader of the board itself is called the chairman. The corporate board has the power to reverse the CEO’s decisions, but the chairman does not have the power to reverse the board’s decisions.

Who is the President? He is considered equal to the other members of the board and in some cases, his figure and that of the CEO can coincide, even if in most companies there is a tendency to separate the two roles to guarantee more defined management of the company.

The difference between CEO and CFO

Now that the meaning of CEO is starting to be increasingly clear, we need to understand who the CFO is and what the difference is between the two roles. The latter term refers to the company’s Chief Financial Officer, better known as the corporate financial director. While, as we have seen, the meaning of CEO requires him to focus his attention on the general aspects of the company, the CFO (almost) exclusively deals with financial matters.

Unlike the CEO, the CFO analyzes the company’s financial strengths and makes judgments and recommendations aimed at improving them. It also tracks the company’s cash flow and takes care of financial planning with regard to investments and capital structure.

The difference between CEO and COO

When it comes to executive positions within the same company, confusion can be quite easy. For small companies still in the development phase, the CEO can simultaneously assume the meaning and role of CFO and also the role of COO, i.e. the Chief Operating Officer.

What is the CEO-COO difference? The meaning of COO is literally that of operating director, generally reporting to the CEO. The COO’s job is to manage the company’s daily operations, monitor company metrics (such as its production quotas), and determine goals.

The difference between CEO and CTO

The CTO also deserves a mention. The English acronym stands for Chief Technology Officer and represents the highest figure in terms of technical responsibility of the company. The CTO is, in essence, the head of the technology department, leading the development and implementation of innovative solutions that can give the company a competitive advantage in the market.

A managerial and operational role at the same time; very different from the CEO who, instead, has general responsibility for the management and success of the business.

How much does a CEO earn?

A CEO’s compensation can vary greatly based on the size, industry, and performance of the company. However, the salaries of CEOs are known to be quite high, starting with high fixed bases, generous bonuses, stock options, and other incentives. For example, CEOs of technology and financial companies may earn annual salaries with figures amounting to 6 or 7 zeros.

In 2021 the CEO of Expedia, Peter Kern, took home 296 million dollars, the highest paid on Wall Street so far. The gap between the salary of a CEO and that of an average worker seems to be growing dramatically, and many are wondering why the remuneration of CEOs should approach such astronomical figures.

The CEO of Alphabet Sundar Pichai is another classic example to understand better than the salary of a CEO. In 2022 alone, Pichai earned approximately 226 million dollars, among other things in shares: that is to say, this value could also increase over time.

What is the salary of Tim Cook, CEO of Apple? According to 2023 data, despite a consensus 40% cut, Cook’s salary continues to boggle minds: 49 million dollars.

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How important is the reputation of a CEO?

It very often happens that the appointment of one CEO rather than another has positive or negative repercussions on the performance of the company stock. Changes of this type can be determined by various factors including, obviously, the market perception regarding the real capabilities of the new CEO. In reality, the way in which the company stock reacts depends on how the company manages the transition phase from one CEO to another.

It is worth noting, however, that a change in CEO carries more downside risk than upside, especially if the transition was not planned. Markets hate uncertainty and the arrival of new management is a classic example of this. Investors tend to be more comfortable with the arrival of a CEO with experience in the sector in which the company operates. The reputation of the new CEO also has its importance and can influence the performance of the stock in one direction or another. Original article published on Money.it Italy 2024-02-08 18:18:35. Original title: Ceo: significato, chi è e cosa fa l’amministratore delegato