Within every organisation, there's a level of management that overlooks the operations and takes on the essential responsibilities of the business.
For most companies, at the top of the management structure is the Chief Executive Officer (CEO), and this person essentially runs the company.
While a chairperson evaluates the performance of the company. Of course, some of the tasks and responsibilities overlap, but there are a few key differences between the two roles. Below, we will dive into what separates a CEO and a chairperson from each other, and look further at the two roles in governance.
What are the roles and responsibilities of a CEO?
The CEO holds the highest-level position in the company. They are a key decision-maker, both for day-to-day decisions and also for more significant picture decisions. For example, they constantly make choices on the business's operations, including which markets to become involved in, how to tackle the competition and so on. At the same time, they are the ultimate decision-maker when it comes to setting the company's goals and vision, like where the business wants to be in five, 10 or 15 years time. And in many cases, the CEO serves as the public face of the company.
In addition to making significant decisions for the business, the CEO is also responsible for coordinating and overlooking the senior management team, which usually includes the Chief Operating Officer (COO) and the Chief Financial Officer (CFO), just to name a few executives.
The role of the senior management team includes:
- Devising a strategic plan for the business and ensuring that it is implemented efficiently.
- Managing the demands of the stakeholders through the board of directors.
- Organising and managing resources for the organisation and more.
And the CEO's task is to supervise the team's performance and delegate these duties to the team members.
At the top of the management structure, the CEO is responsible for engaging the company's staff and creating a healthy and robust company culture.
Last but not least, the CEO is also responsible for setting department budgets for the year, as they have an in-depth understanding of the company's structure and operations.
The CEO's actions and decisions directly relate to a company's performance. With such an immense amount of power, the CEO's goals and visions must align with the goals and visions of the company. However, with that greater power also comes greater responsibility. So, with that, the CEO cannot - and should not - just do whatever they want. CEOs are also accountable to the board of directors.
What are the roles and responsibilities of a chairperson?
The chairperson of the company oversees the board of directors. Elected by the company's shareholders, the chairperson's primary responsibility is to maintain an overall business plan and set long-term goals for the organisation. And while the chairperson does not have complete control or say over the board, they are actually a very powerful and vital force. For example, the chairperson can set meeting agendas and influence the outcomes of votes during board meetings.
Along with the rest of the board, the chairperson's role is less about the company's daily operations, but rather their focus is on the results of the day-to-day actions and decisions of the board, and whether the organisation is living up to its potential and goals. For example, the board of directors ensures the organisation is adhering to CSR and ESG policies. Therefore, the chairperson needs to pay attention to the company's CSR goals and ESG priorities and manage external investors.
The board of directors is responsible for evaluating the CEO's performance and checking whether their actions align with the company's goals. Generally, this is based on profitability and financial performance. However, profitability does not always equate to success, as there are cases where successful companies are not consistently profitable. Therefore, the board needs to judge the CEO and the company on other metrics as well, such as stability and recovery after a challenging financial period.
Since the board and the chairperson keep the CEO accountable by evaluating their performance, the chairperson actually has the power to hire and fire the CEO. So if the board comes to realise that the CEO is not meeting expectations, the chairperson will be in charge of leading the board to organise a replacement.
How do these roles vary between companies?
The structure of a company varies greatly depending on many factors, such as company culture, shareholder status, governance philosophy and nonprofit designation. As a result, the CEO and the chairperson's power also varies greatly between different companies.
There are two main types of chairperson: an executive chairperson and a non-executive chairperson. While these two types share similar responsibilities, an executive chairperson is an employee at the organisation, while a non-executive chairperson is not. For a non-executive chairperson, their main duty is to oversee the board of directors, and they generally remain at a distance from the company.
On the other hand, an executive chairperson will have other jobs and responsibilities at the company, so they will take a more active role in running the company. An executive chairperson could be a former CEO who wants to contribute and help the company move forward. For example, Robert Iger was the CEO of The Walt Disney Company until 2020. Since then, he has been working at Disney as the Executive Chairman.
But despite the two types of chairperson, there are still some distinctions between the CEO and the chairperson's role. Generally speaking, the two roles differ in the following ways:
- Perspective — the chairperson guides high-level policy decisions, while the CEO leads from within an organisation's operational structure and leads operations.
- Daily operations — the chairperson is generally not responsible for the company's day-to-day operations, but the CEO is highly involved with these activities.
- Rank — the chairperson sits at the top of the board of directors, while the CEO sits at the top of the company's operational structure.
- Reporting — the chairperson manages the company's board of directors, and the CEO directly manages the company's senior executives.
- Delegation — the chairperson delegates board members to serve as committee members or committee advisors, and the CEO delegates senior executives and senior managers to serve as committee heads.
Whatever the case, the best and ideal Chairperson-CEO relationships are those that collaborate. This means they need to have the same goals in mind and work together to achieve them. Sometimes, this means having a similar idea of the techniques to reach their goals. Therefore, strong communication is essential between the CEO and the chairperson.
Can one person be a CEO and a Chairperson at the same time?
Most definitely. It is certainly possible and not unheard of for one person to be both the CEO and the chairperson of a company. In fact, there are many famous cases where the two roles are held by the same person. More notably, Jeff Bezos for Amazon and Mark Zuckerberg for Meta (previously known as Facebook). Also, according to CEO World Magazine, the most influential CEO in the world last year was Jamie Dimon, who holds both positions as the CEO and the Chairman at JPMorgan Chase & Co. And on the magazine's list of the top ten CEOs, four of them are both the CEO and the Chairman simultaneously.
One person acting as the CEO and the Chairperson means that this person can streamline the decision-making process and create a clearer company culture. This can be particularly beneficial in smaller companies, where an individual with skill and passion could greatly transform the fate of the business.
However, there are some drawbacks to having a joint CEO and chairperson. As mentioned before, the board of directors and the chairperson holds the CEO accountable by assessing their performance. If the chairperson is also the CEO, then that means that the same person will be discussing and voting on their own performance. And as the board votes on the pay of senior management, a chairperson who is also the CEO would be involved in deciding their own pay.
As a result, some governance watchdogs have encouraged greater separation between the board and the senior management, as having the same person act as the CEO and the chairperson could lead to bias. In addition, since a company's chairperson has the authority to hire and fire the CEO, a joint CEO and chairperson role could lead to some challenges if the CEO is not performing up to the standards.
Ultimately, the relationship between the chairperson and CEO will depend on your company. Every board has their own priorities and plans. Above all, the CEO and Chairperson should always ensure good communication. A board portal like BoardPro will help manage these relationships and maintain strong communication easier. With smart features such as shared annotations, instant voting and action items, your organisation can make sure that your CEO and chairperson are always on the same page, even if they are not the same person.
If you would like to learn more about how we can help your organisation, get in touch with the BoardPro team today.
