CEO stands for Chief Executive Officer. However, people who want to understand the role of the CEO need to understand the nature of the corporation. In short, a corporation is a kind of business that possesses its own independent existence, which is not something that can be said for either sole proprietorships or partnerships. As a result, the shareholders of a corporation elect some of their members to represent their interests as the Board of Directors, who serve as oversight for the corporation as a whole. However, the Board of Directors is not involved in running the operations of the corporation. Instead, it entrusts said duties and responsibilities to its chosen executives, with the CEO being the most important of them. At this point, it should be mentioned that CEOs are not forbidden from sitting on the Board of Directors. In fact, it is not uncommon for CEOs to serve as the Chairman of the Board, which is a setup that can have its fair share of potential upsides.
What Does a CEO Do?
Generally speaking, a CEO is supposed to have a number of important roles. First, they serve as the point of connection between the Board of Directors and the corporation’s operations. Second, they serve as the head of the corporation’s operations, being the one who chooses the corporation’s overall course of action while in consultation with other executives. Third, they are the leader of the corporation, meaning that they are responsible for motivating their employees as well as carrying out a wide range of other managerial tasks. Fourth, it is not uncommon for CEOs to serve as the point of contact between a corporation and the media, though this tends to be limited to the most important announcements because the rest can be entrusted to PR specialists. Summed up, CEOs can be entrusted with a wide range of duties and responsibilities because in the end, the exact demands placed upon the head of a corporation depends a great deal on how the corporation is set up.
How Much Difference Can There Be From One CEO to the Next?
To get a better idea of how much difference there can be from one CEO to the next, consider two CEOs put in charge of two corporations, with one being much bigger than the other. Theoretically, both CEOs might have very similar duties and responsibilities, but in practice, they can have very different tasks to complete as a result of those duties and responsibilities.
For example, the CEO in charge of the bigger corporation will have minimal contact with the situation on the ground. Simply put, it would be impossible because bigger corporations can encompass dozens and dozens of offices situated on multiple continents, meaning that it would be an ineffective and inefficient use of the CEO’s time for them to engage with those of their employees on the metaphorical frontline. Instead, the CEO’s main contact with said employees would be through other executives, who in turn, would be reliant on lower tiers of management to pass relevant information up to them. Summed up, the CEOs of bigger corporations are separated from the lowest tiers of the corporate hierarchy by a much greater distance, which is necessary because they are presiding over a much wider set of operations.
In contrast, it is not uncommon for the CEOs of smaller corporations to take an active hand in the day-to-day activities of the corporations that have been entrusted to them. Certainly, their primary focus remains the strategic movements of their corporation, which will be made based on the information fed to them by their executives. However, the flatter nature of the corporate hierarchy means that the CEO can engage with the employees towards the bottom without it being an inefficient use of their limited time, which in turn, means that they might make day-to-day decisions as well. CEOs of smaller corporations tend to have a much more solid grasp on their operations, but that isn’t an indication of their skill so much as an indication of the more manageable nature of their tasks.
With that said, no matter the exact nature of a CEO’s tasks, their role is critical. After all, they are ones who are in charge of their corporation’s overall plan for achieving its stated goals, which in turn, means that they are serving as the heads of their corporations in a very literal sense. As a result, it is no wonder that a change of CEO is often interpreted as a potential change of course for the corporation as a whole, which tends to makes investors twitch because of what that could mean for their expectations for the future.