What level of management is a ceo

Responsibilities of the CEO

A CEO can (theoretically) take on any tasks or responsibilities they wish; indeed, some CEOs, particularly within smaller organizations, tend to be pretty hands-on with some corporate functions.

CEOs may gravitate towards certain functions like marketing or finance, depending on their professional background and expertise. The stage of the company lifecycle matters, too; for example, CEOs at earlier stage ventures may spend a larger proportion of their time fundraising than counterparts at more mature firms.

In practice, however, a CEO’s time and expertise are best spent focusing on a handful of really high-impact, core responsibilities. These include:

1. Setting and Executing Organizational Strategy

Decisions about new product lines, generating (and/or maintaining) competitive advantages, potential new markets, and mitigating risks or seizing on opportunities (among others) all fall under the purview of the CEO.

As with anything in an organization, they will rely on considerable data and input from senior leaders as well as direction and insight from the Board of Directors, but the CEO is the individual that has operational control over strategy and execution.

2. Building the Senior Leadership Team

Effective CEOs are able to attract top talent to their organizations. While they aren’t responsible for hiring or terminating every individual employee, they are responsible for building and overseeing the executive leadership team who, in turn, hire and oversee upper and middle management within their divisions. 

The executive leadership team includes the CFO (Chief Financial Officer), the COO (Chief Operating Officer), and, depending on the nature of the organization, all the other C-suite roles that may exist (Chief Risk Officer, Chief Technology Officer, Chief Strategy Officer, Chief Investment Officer, etc.)

In many organizations, the Board will have final (formal) authority on hiring decisions at the C-level, but, in most instances, the board actually defers to the recommendation(s) of the CEO.

3. Making Capital Allocation Decisions

While division and departmental managers may be responsible for managing their respective budgets, the responsibility for setting and managing the organization’s overall budget in order to effectively execute strategic initiatives ultimately falls upon the CEO.

Furthermore, the CEO will also weigh in on when (and how) to raise funds, as well as how to make the best use of surplus capital. Strategies include repaying debt, distributing capital by way of dividends or share repurchases, or reinvesting in the business.

4. Setting Vision, Values, and Corporate Culture

Corporate culture has many elements that are organic in nature, but the mission, vision, and values designed and implemented by the CEO will ultimately steer that culture in any number of different directions.

The CEO must be very aware of their tenor, their behavior, and every single action they take (or don’t take) – the entire organization is watching. Even decisions around what they wear or how they choose to present themselves and engage with other members of the firm will set the tone for the rest of the organization.

5. Communicating Effectively with All Stakeholders

The CEO is the face of the organization. They may be representing the firm in front of the general public, the press, lawmakers or other regulators, employees, customers, suppliers, or any number of other parties interested in company operations.

Relaying core elements of vision, values, and mission is important, but actually living these values is even more critical. The CEO is never really “off duty” – there is always someone watching or listening. 

Characteristics of a Successful CEO

As with anything, there is no one-size-fits-all formula. But successful CEOs generally have (or exhibit) many of the following characteristics:

• Extraordinary passion. It takes a special kind of leader to be able to handle the pressure and the scrutiny that comes with such a high-profile position.
• Clear vision. Developing a business strategy requires that a CEO be many steps ahead of the general public in seeing and understanding how trends may evolve. 
• Strong leadership. Even with unmatched passion and foresight, the business can’t get there without the right people in place to make things happen. CEOs must be able to attract talented human capital that will support the company’s mission and vision.
• Effective communication skills. A CEO is always under scrutiny and must constantly deliver and reinforce the organization’s message. It’s rare to see a CEO that isn’t comfortable in front of an audience or a television camera.

Corporate Governance

A typical organizational structure looks like this:

The CEO is the top operational decision-maker within an organization, but they report to the Board of Directors (BOD).

All appointments to (or removals from) the BOD are voted on by shareholders of the company. Conceptually, this is what creates a Corporate Governance function within an organization. 

The BOD is a safeguard that provides a layer of protection for (and to generally look out for) the rights and interests of stakeholders. This ensures that the CEO – while a highly-coveted title – does not have complete dictatorial control over the entire firm.

Driven in large part by the emergence of ESG (Environmental, Social & Governance), the nature of board oversight has evolved. While historically, their sole responsibility was looking out for shareholders (often called shareholder primacy), increasingly, boards are being expected to look out for all stakeholders more broadly, including consumers, employees, suppliers, and the general public.

CEO vs. Chair of the Board

The CEO is the top operator in the organization; in other words, they’re in charge of the company. The Chair of the Board, on the other hand, is in charge of the Board. 

The CEO is, technically, subordinate to the Chair of the Board.

In some instances, the CEO also serves as the Chair. However, as scrutiny around corporate governance practices continues to grow, many firms are moving away from that model. 

Since the Board is responsible for evaluating the performance of the CEO, including voting on his or her compensation (and even their dismissal, if warranted), it’s obvious that a potential conflict of interest exists when the CEO is the Chair.

Additional Resources

Thank you for reading CFI’s guide to CEO. At CFI, we’re on a mission to help you advance your career. Some of our most popular free resources include:

• Stakeholder vs Shareholder
• Board of Directors
• C-Suite
• Shareholder Primacy

If you have wondered who is the senior-most between the CEO and Managing Director of a company, or what the difference between the two roles are, then you are not alone. They are both among the most senior leaders at any company. But there are some differences. Their roles are largely different and both are essential to a company’s smooth running, depending on the company.

Not every company has an MD or a managing director. But every company has a CEO or a chief executive officer. That’s the main difference between a CEO and Managing Director. The CEO’s role is more prominent and more common than the Managing Director’s role.

Here are some of the specifics.

CEO vs Managing Director

Who is a CEO?

A CEO is at the highest level of hierarchy at any organization. Their job includes overseeing all areas of the company, whether operations or sales. But they do not involve themselves in the day-to-day workings of every department. They are more concerned with the overall running, strategies, and goals of the company. They are also the face of the company in the public eye.

Who is a Managing Director?

A Managing Director is, on the other hand, among the highest leaders at an organization and usually functions under the CEO. They might also be part of the board of directors. The Managing Director is responsible for the day-to-day functioning of the company. In some companies, the Managing Director is answerable to the company’s shareholders in matters that regard the company’s future.

Responsibilities

A CEO is responsible for the overall success of the company. They are in charge of setting goals and strategies for the company’s future. They are also in charge of making all the important decisions for every aspect of the company.

A Managing Director reports to the CEO on updates and concerns on the day-to-day business of the company. They might also report to the board. They are responsible for the smooth functioning of daily processes and manage the managers and other department heads in a company. They are also tasked with liaising with the shareholders of the company.

Hierarchy

The CEO is at the highest position in a company. They head C-level members such as the COO, CTO, CFO, etc. They also rank higher than the vice president and many times, the Managing Director. They only report to the board of directors and the chairperson of the board of directors.

The Managing Director on the other hand has a vastly different place in the hierarchical order. In many companies they work under the CEO. In others their role might be at par with the CEO and they might also be a part of the board of directors. In this case they report to the chairperson of the board.

Functional role

The CEO is the company’s decision-maker. The highest-ranking executive, the CEO is the face of the company to the public and internally as well. The CEO is responsible for developing and putting into motion the vision and long-term goals of the company. They are also involved in developing company policy and implementing the company’s strategic goals. They oversee the duties of the other C-level executives.

The Managing Director of a company oversees the function and performance of different departments. They also look after the daily performance and functioning of the departments or managers under them. Oftentimes the Managing Director is part of the board of directors. They work closely with the board to create policies and strategies for the success of the company. A Managing Director’s role isn’t written in stone, and can also involve aspects of a COO’s role or a vice president’s role too. This depends largely on the structure and requirements of a company.

Exceptions

There are instances where the titles of CEO and Managing Director belong with the same person. This usually happens when the CEO is also the founder of the company. While this is not uncommon, it is usually preferred that the roles are held by different people so that the power and authority that comes with them are distributed.

Similarities

There are a few areas that CEOs and managing directors have similarities. This is usually with regards to their skills. Here are a few skills that both CEOs and managing directors share.

So, a CEO’s role might or might not be higher than that of a Managing Director’s. It depends largely on the company’s corporate and hierarchical structure.