The designation between CEO and director can be a bit confusing in the context of their responsibilities and power-sharing. It seems like both hold the same key or status. But when you delve in closer and introspect their functions and duties, you can get a sense of who holds the most power. Here, let’s know about the responsibilities of them- CEO vs Director.
Let’s look at their responsibilities first to get a better understanding of who holds the greater position.
Who is a Ceo?
CEO or Chief Executive Officer are the ones responsible for charting out strategy and overall vision of the company. He is in charge of overseeing the daily activities of a company and has the administrative power over signing cheques and issuing certificates. He is the face of the company as he is the one representing the company in all the public events. Example:- CEO Sundar Pichai of Google. He is a leader of the company and the executor of change to the company. A CEO directly reports to the board of directors and is not accountable to the company’s shareholders.
Let’s find out who is this board of directors that a CEO reports to:-
They are a panel of elected people representing shareholders. These boards of directors are an essential part of a public company. It is mandatory by law to have a board of members. Those private companies keep the board of directors only out of necessity but they are not bound legally to have them.
What do they do?
- Their focal responsibility is to protect the interest of shareholders.
- They are responsible for making or framing policies for the best interests of the management.
- Their purpose is to take every important decision that impacts the organization’s functioning.
Other functions include:-
- They are in charge of Creating dividend policies and options policies.
- They Hire and fire senior executives (especially the CEO).
- Responsible for establishing compensation for executives.
- They Support executives and their teams.
- They take part in maintaining the company resources and setting general company goals.
- While making sure that the company has all that it needs to run smoothly.
It is widely agreed that the board looks after the main interests of its owners or shareholders, to do that, the board includes both internal and external members in the board of directors which allows it to have an overall insight into the effective management of the company.
- A chief executive officer working under the board of directors has varied responsibilities and consist of many important tasks that make a business thrive and prosper.
- They include making decisions that increase the share price or market prices. They deal with the revenues of the company.
- A CEO’s responsibilities differ according to the type of company they work in.
For instance, A CEO is known for making long-term and short-term mission plans such as poverty reduction plans or setting up substantial educational goals for increasing literacy in a non-profit organization and government organization.
Whom does a CEO control or supervise.
They have an edge of power over the president as well as the chief executive, CEE, and the managing director.
Let’s find out how a CEO functions in its many roles and responsibilities.
- As a leader, a CEO is the one who drives the change needed within the organization and plays a key part in motivating the employees.
- The CEO oversees the operations in all the fields of the business.
- He makes all the key decisions relating to all the fields of the business
Now, let’s look at the position of a director and its roles and responsibilities.
In a corporation, a director is a position that holds the lowest level in the executive class. A director is responsible for a department in a company. For instance, they are in charge of either finance, marketing, or sales. They focus on only one sole department. They report to the managing director/CEO. In some countries, CEO and Managing Directors are used interchangeably. For instance, an MD is known as a CEO in the US. Therefore you could say that a director reports to the CEO as well.
Note:- Directors appointed by shareholders Who are the owners of the company that exchange assets for shares of the stock look after the management of its corporation. And then some officers are appointed by directors to manage the daily affairs of the company. However, this should not confuse you when you see a CEO who is a part of the board of directors as well as owns shares of the stock of the company. It is a common occurrence in many companies.
Let’s look at the important types of directors.
- There is the chairman of the board. This is the leader of the board whose role is to look after the other directors and work hand in hand with the Chief Executive Officer and other officers to formulate and implement important business strategies.
- Then there are the ones who are elected from the internal source. Those internal directors are those who have a special insider experience in the success of the company or workings in the daily operations. Only such are elected as they have a better understanding and can give a clear inside perspective.
- Some external directors are elected from the outside of the company. The criteria for selecting them is the opposite of the internal directors. They are there to offer an unbiased and impartial perspective, unlike those directors elected from the internal source.
While it can sometimes be confusing as to the role the CEO and director hold. Sometimes a CEO can also be a director or often serve as chairman of the company’s board of directors. These officers are elected by the board of directors but they can also be a part of the board of directors. A CEO is the highest-ranking executive that is responsible for the operations of the corporation at every level and he/she reports directly to the chairman of the board. Therefore a conflict of interest usually takes place when a CEO and chairman are the same people. The title and the role of a director and board of directors and CEO and MD can be confusing at times, therefore to eliminate those doubts, it is best to study their functions per the nature of the organization/corporation or business. Most of the time it depends on what type of company they are working at. For instance, a founder’s company and a non-founder one. Therefore, one needs to research these roles accordingly.