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A chief executive officer (CEO), also known as a central executive officer (CEO), chief administrator officer (CAO) or just chief executive (CE), is one of a number of
corporate executives A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and r ...
charged with the management of an
organization An organization or organisation (Commonwealth English; see spelling differences), is an entity—such as a company, an institution, or an association—comprising one or more people and having a particular purpose. The word is derived from ...
especially an independent
legal entity In law, a legal person is any person or 'thing' (less ambiguously, any legal entity) that can do the things a human person is usually able to do in law – such as enter into contracts, sue and be sued, own property, and so on. The reason for ...
such as a
company A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal person, legal or a mixture of both, with a specific objective. Company members share a common p ...
or
nonprofit institution A nonprofit organization (NPO) or non-profit organisation, also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and operated for a collective, public or social benefit, in co ...
. CEOs find roles in a range of organizations, including public and private
corporation A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and r ...
s, non-profit organizations and even some government organizations (notably
state-owned enterprise A state-owned enterprise (SOE) is a Government, government entity which is established or nationalised by the ''national government'' or ''provincial government'' by an executive order or an act of legislation in order to earn Profit (econom ...
s). The CEO of a corporation or company typically reports to the
board of directors A board of directors (commonly referred simply as the board) is an executive committee that jointly supervises the activities of an organization, which can be either a for-profit or a nonprofit organization such as a business, nonprofit organiz ...
and is charged with maximizing the value of the business, which may include maximizing the
share price A share price is the price of a single share of a number of saleable equity shares of a company. In layman's terms, the stock price is the highest amount someone is willing to pay for the stock, or the lowest amount that it can be bought for. B ...
, 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, usually provided by legislation. CEOs are also frequently assigned the role of main manager of the organization and the highest-ranking officer in the
C-suite Corporate titles or business titles are given to corporate officers to show what duties and responsibilities they have in the organization. Such titles are used by publicly and privately held for-profit corporations, cooperatives, non-profit or ...
.


Origins

The term "chief executive officer" is attested as early as 1782, when an ordinance of the Congress of the Confederation used the term to refer to governors and other leaders of the executive branches of each of the Thirteen Colonies. In draft additions to the ''
Oxford English Dictionary The ''Oxford English Dictionary'' (''OED'') is the first and foundational historical dictionary of the English language, published by Oxford University Press (OUP). It traces the historical development of the English language, providing a com ...
'' published online in 2011, the ''Dictionary'' says that the use of "CEO" as an acronym for a chief executive officer originated in Australia, with the first attestation being in 1914. The first American usage cited is from 1972.


Responsibilities

The responsibilities of an organization's CEO are set by the organization's
board of directors A board of directors (commonly referred simply as the board) is an executive committee that jointly supervises the activities of an organization, which can be either a for-profit or a nonprofit organization such as a business, nonprofit organiz ...
or other authority, depending on the organization's structure. They can be far-reaching or quite limited, and are typically enshrined in a formal delegation of authority regarding
business administration Business administration, also known as business management, is the administration of a commercial enterprise. It includes all aspects of overseeing and supervising the business operations of an organization. From the point of view of management ...
. Typically, responsibilities include being an active decision-maker on
business strategy In the field of management, strategic management involves the formulation and implementation of the major goals and initiatives taken by an organization's managers on behalf of stakeholders, based on consideration of resources and an assessmen ...
and other key policy issues,
leader Leadership, both as a research area and as a practical skill, encompasses the ability of an individual, group or organization to "lead", influence or guide other individuals, teams, or entire organizations. The word "leadership" often gets vi ...
, 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. The CEO is tasked with implementing the goals, targets and strategic objectives as determined by the board of directors. As an executive officer of the company, the CEO reports the status of the business to 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. The CEO is the person who is ultimately accountable for a company's business decisions, including those in operations, marketing, business development, finance,
human resources Human resources (HR) is the set of people who make up the workforce of an organization, business sector, industry, or economy. A narrower concept is human capital, the knowledge and skills which the individuals command. Similar terms include m ...
, etc. The use of the CEO title is not necessarily limited to describing the owner or the head of a company. For example, 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 A Dual Board or Two Tier system is a corporate structure system that consists of two bodies i.e. the Council of Delegates to govern the Board of Directors and the Board of Directors to manage a corporation. The roles and relationships between the ...
system with two separate boards, one executive board for the day-to-day business and one
supervisory board In corporate governance, a governance board also known as council of delegates are chosen by the stockholders of a company to promote their interests through the governance of the company and to hire and fire the board of directors. In civil s ...
for control purposes (selected by the shareholders). In these countries, the CEO presides over the executive board and the
chairperson The chairperson, also chairman, chairwoman or chair, is the presiding officer of an organized group such as a board, committee, or deliberative assembly. The person holding the office, who is typically elected or appointed by members of the grou ...
presides over the supervisory board, and these two roles will always be held by different people. This ensures a distinction between
management Management (or managing) is the administration of an organization, whether it is a business, a nonprofit organization, or a government body. It is the art and science of managing resources of the business. Management includes the activities o ...
by the executive board and
governance Governance is the process of interactions through the laws, social norm, norms, power (social and political), power or language of an organized society over a social system (family, tribe, formal organization, formal or informal organization, a ...
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
shareholder A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the legal own ...
s) is often equivalent to the supervisory board, while the executive board may often be known as the
executive committee A committee or commission is a body of one or more persons subordinate to a deliberative assembly. A committee is not itself considered to be a form of assembly. Usually, the assembly sends matters into a committee as a way to explore them more ...
(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 The California Corporate Disclosure Act was an act written by California Assemblyman Kevin Shelley and signed into law by California Governor Jerry Brown Edmund Gerald Brown Jr. (born April 7, 1938) is an American lawyer, author, and politician ...
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 A sole proprietorship, also known as a sole tradership, individual entrepreneurship or proprietorship, is a type of enterprise owned and run by one person and in which there is no legal distinction between the owner and the business entity. A sole ...
, an executive officer is the sole proprietor. In the case of a
partnership A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments o ...
, an executive officer is a managing partner, senior partner, or administrative partner. In the case of a
limited liability company A limited liability company (LLC for short) is the US-specific form of a private limited company. It is a business structure that can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a ...
, an executive officer is any member, manager, or officer.


Related positions

Depending on the organization, a CEO may have several subordinate executives to help run the day-to-day administration of the company, each of whom has specific functional responsibilities referred to as senior executives, 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 A vice president, also director in British English, is an officer in government or business who is below the president (chief executive officer) in rank. It can also refer to executive vice presidents, signifying that the vice president is on ...
(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). Examples of subordinate executive officers who typically report to the CEO include the
chief operating officer A chief operating officer or chief operations officer, also called a COO, is one of the highest-ranking executive positions in an organization, composing part of the "C-suite". The COO is usually the second-in-command at the firm, especially if t ...
(COO),
chief financial officer The chief financial officer (CFO) is an officer of a company or organization that is assigned the primary responsibility for managing the company's finances, including financial planning, management of financial risks, record-keeping, and financ ...
(CFO),
chief strategy officer A chief strategy officer (CSO) is an executive that usually reports to the CEO and has primary responsibility for strategy formulation and management, including developing the corporate vision and strategy, overseeing strategic planning, and leading ...
(CSO), and chief business officer (CBO). The
public relations Public relations (PR) is the practice of managing and disseminating information from an individual or an organization (such as a business, government agency, or a nonprofit organization) to the public in order to influence their perception. P ...
-focused position of
chief reputation officer Chief may refer to: Title or rank Military and law enforcement * Chief master sergeant, the ninth, and highest, enlisted rank in the U.S. Air Force and U.S. Space Force * Chief of police, the head of a police department * Chief of the boa ...
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".


United States

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.


United Kingdom

In the UK, chief executive and chief executive officer are used in
local government Local government is a generic term for the lowest tiers of public administration within a particular sovereign state. This particular usage of the word government refers specifically to a level of administration that is both geographically-loca ...
, business, and the charitable sector. , the use of the term
director Director may refer to: Literature * ''Director'' (magazine), a British magazine * ''The Director'' (novel), a 1971 novel by Henry Denker * ''The Director'' (play), a 2000 play by Nancy Hasty Music * Director (band), an Irish rock band * ''D ...
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. The term managing director is often used in lieu of chief executive officer.


Celebrity CEOs

Business publicists since the days of
Edward Bernays Edward Louis Bernays ( , ; November 22, 1891 − March 9, 1995) was an American theorist, considered a pioneer in the field of public relations and propaganda, and referred to in his obituary as "the father of public relations". His best-known ca ...
(1891-1995) and his client
John D. Rockefeller John Davison Rockefeller Sr. (July 8, 1839 – May 23, 1937) was an American business magnate and philanthropist. He has been widely considered the wealthiest American of all time and the richest person in modern history. Rockefeller was ...
(1839-1937) and even more successfully the corporate publicists for
Henry Ford Henry Ford (July 30, 1863 – April 7, 1947) was an American industrialist, business magnate, founder of the Ford Motor Company, and chief developer of the assembly line technique of mass production. By creating the first automobile that mi ...
, promoted the concept of the "
celebrity Celebrity is a condition of fame and broad public recognition of a person or group as a result of the attention given to them by mass media. An individual may attain a celebrity status from having great wealth, their participation in sports ...
CEO". Business journalists have often adopted this approach, which assumes that the corporate achievements, especially in the arena of manufacturing, are produced by uniquely 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 - compare the " great man theory". Guthey ''et al.'' argues 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". Journalism thereby exaggerates the importance of the CEO and tends to neglect 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. There may be an emphasis on the sort of decisions that attract the celebrity journalists. Research published in 2009 by
Ulrike Malmendier Ulrike M. Malmendier (born 1973) is a German economist who is currently a professor of economics and finance at the University of California, Berkeley. Her work focuses on behavioral economics, corporate finance, and law and economics. In 201 ...
and Geoffrey Tate indicates that "firms with award-winning CEOs subsequently underperform, in terms both of stock and of operating performance".


Criticism


Executive compensation

Executive compensation has been a source of criticism following a dramatic rise in pay relative to the
average worker's wage Average wage is the mean salary of a group of workers. This measure is often monitored and used by government or other organisations as a benchmark for the wage level of individual workers in an industry, area or country. The usefulness of this me ...
. For example, the relative pay was 20-to-1 in 1965 in the US, but had risen to 376-to-1 by 2000. The relative pay differs around the world, and, in some smaller countries, is still around 20-to-1. Observers differ as to whether the rise is due to competition for talent or due to lack of control by compensation committees. In recent years, investors have demanded more say over executive pay.


Diversity

Lack of diversity amongst chief executives has also been a source of criticism. In 2018, 5% of ''Fortune'' 500 CEOs were women. The reasons for this are explained or justified in various ways, and may include biological sex differences, male and female differences in
Big Five personality traits The Big Five personality traits is a suggested taxonomy, or grouping, for personality traits, developed from the 1980s onward in psychological trait theory. Starting in the 1990s, the theory identified five factors by labels, for the US English ...
and temperament,
sex differences in psychology Sex differences in psychology are differences in the mental functions and behaviors of the sexes and are due to a complex interplay of biological, developmental, and cultural factors. Differences have been found in a variety of fields such as men ...
and interests, maternity and career breaks,
hypergamy Hypergamy (colloquially referred to as "marrying up") is a term used in social science for the act or practice of a person marrying a spouse of higher caste or social status than themselves. The antonym "hypogamy" refers to the inverse: marryin ...
,
phallogocentrism In critical theory and deconstruction, phallogocentrism is a neologism coined by Jacques Derrida to refer to the privileging of the masculine ( phallus) in the construction of meaning. The term is a blend word of the older terms '' phallocentri ...
, the existence of old boy networks, tradition, and the lack of female role models in that regard. Some countries have passed laws mandating boardroom gender quotas.


See also

*
CEO succession CEO succession refers to the process by which boards of directors ensure that their organization has the ability to sustain excellence in CEO leadership over time, with transitions from one leader to the next. Commercial importance CEO successio ...
*
CEO of public schools A Chief Executive Officer of public schools, or a CEO of schools is an educational professional who is responsible for the administration of a public school district. Similarly to a receiver, CEOs replace traditional superintendents in managing th ...
* Executive officer *
Glass cliff The glass cliff is the phenomenon of women in leadership roles, such as executives in the corporate world and female political election candidates, being likelier than men to achieve leadership roles during periods of crisis or downturn, when t ...
*
List of books written by CEOs A list of notable books written by CEOs, about CEOs and business. Books References {{Reflist CEO A chief executive officer (CEO), also known as a central executive officer (CEO), chief administrator officer (CAO) or just chief executive ...
*
List of chief executive officers The following is a list of chief executive officers of notable companies. The list also includes lead executives with a position corresponding to chief executive officer (CEO), such as managing director (MD), and any concurrent positions held. Lis ...
*
Occupational Information Network The Occupational Information Network (O*NET) is a free online database that contains hundreds of job definitions to help students, job seekers, businesses and workforce development professionals to understand today's world of work in the United Stat ...
*
United States Department of Labor The United States Department of Labor (DOL) is one of the executive departments of the U.S. federal government. It is responsible for the administration of federal laws governing occupational safety and health, wage and hour standards, unemploy ...
*
Prime minister A prime minister, premier or chief of cabinet is the head of the cabinet and the leader of the ministers in the executive branch of government, often in a parliamentary or semi-presidential system. Under those systems, a prime minister i ...
*
City manager A city manager is an official appointed as the administrative manager of a city, in a "Mayor–council government" council–manager form of city government. Local officials serving in this position are sometimes referred to as the chief execu ...


References


Further reading

* * * * Vancil, Richard F. ''Passing the baton: Managing the process of CEO succession'' (Harvard Business School Press, 1987).


External links

* * {{DEFAULTSORT:Chief Executive Officer Management occupations E Positions of authority Leadership