If you were to state some of the richest people in your country or even the world – you’ll most likely mention a person who owns a business or has a high position in an organization. These people who have high positions and earn oh so certainly high salaries are usually the CEOs of organizations. Before and even during the pandemic, the salary for CEOs remains staggeringly big. But what do they do anyway? Why the high compensation?
What is a CEO?
CEO stands for Chief Executive Officer. In other companies, the CEO can also be known as the chief executive, president, or managing director. For this article, we will be sticking with the role name of CEO. The person of this position is the highest-ranking individual in a company or organization. The responsibilities of the CEO is to be in charge of the overall success of the business or organization through making top-level managerial decisions or major and impactful decisions to say the least. The CEO has the ultimate authority in making final decisions.
While the CEO makes the final decision and has the highest ranking role, the CEO still has to directly report and is held accountable by the Board of Directors or BoD of the company or organization. The BoD inspects the overall performance of the company and holds the CEO into account to changes and happenings of the company.
But what and who are the BoD? The Board of Directors is actually a group of individuals elected to represent the shareholders of the company. In some cases, the CEO even sits on the same board and can even be the chairperson. All these are still dependent on the rules and regulations of the company.
Beyond making decisions and answering to the BoD, the CEO does have specific roles and responsibilities like any member in the organization.
Roles and responsibilities of a CEO
While the roles and responsibilities of a CEO may differ from one company to another and is dependent on the organizational structure and/or size of the company, here are some general duties, responsibilities, and job descriptions of a CEO as according to the Corporate Finance Institute.
- Communicate with relevant sectors to the company such as shareholders, government sectors, and the public on behalf of the company. If you were to hear a specific person who has commented for a company, chances are that person is the CEO. Also, CEOs are much more famous than anyone in the company. You would hear Mark Zuckerberg’s name mentioned often from news reports to interviews because he is the CEO of Facebook.
- Leading the development of the company’s short and long-term strategy. Regardless of the size of the company, the CEO still leads the company’s development. This is needed to have a head or leading person to provide structure and direction.
- Leading the company’s mission vision. Especially with changes in the organization, being aware of the mission and vision is needed in order to maintain the meaning behind what makes the company, the company.
- Evaluating the work of other executive leaders within the company such as directors, vice presidents and presidents. The CEO may be the leader of the company but there are also leaders segmented per department of the company hence they are called as executives. CEOs evaluate if the other executives are able to do their tasks and duties well because they have a more specific role and focus in their work and if they don’t do their work well, it will impact the decisions that the CEO makes.
- Maintaining awareness of competition and developments. The CEO is in charge of the overall progression of the company. Hence being aware of the competition around the company and opportunities to expand and to develop the company is a must.
- Ensuring that the company maintains high social responsibility. This is actually on a newer side of advocacy by companies as people in general are becoming more aware of the impacts of their purchases to the environment and society. Companies then are adopting to increase their awareness in making sure that the company maintains good responsibility in contributing to society, implementing ethical practices, and avoiding negative impacts to the environment.
- Assessing and minimizing risks. Any company or organization are at risk and never invincible no matter how big we think a certain company is. An example would be Kodak or Nokia which are companies that were once the leaders in their industries but were out beaten by other companies. CEOs then have to be aware of any potential risks that the company would and could face to know how to address or avoid these risks to the company.
- Making sure goals are strategic, measurable, and describable. CEOs are usually the biggest decision makers for companies. This is a big pressure and expectation because the company will then execute the approved decisions. CEOs then have to make sure the plans approved are measurable in numbers, describable so it’s not just wistful imagination, and strategic to ensure outcomes.
Now comparing CEO descriptions based on the size of the company – let’s say we are looking at the CEO of Netflix which is a big company. The CEO is responsible for leading the development and execution long-term strategies, with a specific goal of increasing shareholder value. Also, don’t forget as mentioned earlier that CEOs usually deal with top-level decisions or major company strategies. Looking at CEOs in smaller companies, the CEO actually takes on a more “hands-on” role such as making lower-level decisions of hiring staff.
These do make sense if we think of it on a personal level. It is easy for us to delegate tasks in our household if the household only consists of you and your parents. On this small scale, you’re able to make decisions together as to what brand of vacuum you would need, as to how much laundry each person should do. Now, place in 6 more siblings, 5 nieces and nephews, 2 pairs of grandparents, and 6 aunts and uncles. Well, that sounds like a big family! If you were to delegate tasks and make decisions, you wouldn’t be able to think to the smallest details as to how much toothpaste each person needs. But as the person in charge of the household, you will need to make impactful decisions such as the budget of the month in buying household items and groceries.