Every company has a management team to make sure things run according to plan. Public companies must have a board of directors which is led by a Chairman. Most companies also have a Chief Executive Officer (or CEO). In many cases, both roles are performed by the same person. But what exactly do these different titles mean?
In short, the CEO runs the company, while the Chairman evaluates the company’s performance. Their duties can vary between companies but some things stay the same. Here are some of the key differences between these roles:
What are the roles and responsibilities of a CEO?
The CEO is the highest-level employee and decision-maker, who is responsible for day-to-day decisions. This means creating a strategic plan for the company’s performance. They must constantly make choices, such as which markets to become involved with and how to take on the competition.
The CEO is responsible for coordinating the senior management team. They are involved in overseeing this team’s performance and delegating duties. It’s the CEO’s responsibility to engage their staff and create a strong company culture. They set department budgets for the year and have an in-depth understanding of the company’s structure.
The actions of the CEO add up to around 45% of a company’s performance! This shows how important it is to make sure their goals line up with the goals of the company. However, the CEO can’t just do what they want. They are accountable to the board of directors, and as a result, the Chairman of the board.
What are the roles and responsibilities of a Chairman?
The Chairman of the company oversees the board of directors. They are elected by the company’s shareholders to maintain an overall business plan and set long-term goals. Although the Chairman doesn’t have absolute control over the board, they are a very powerful force. They can set the agenda of meetings as well as influence the outcome of votes.
As with the rest of the board, their role is less about the day-to-day running of the company. Instead, their focus is on the results of these day-to-day actions and whether the company is living up to its potential. They must pay attention to the company’s CSR goals and ESG concerns, as well as dealing with external investors.
The board is also responsible for assessing the CEO to check that their actions are in line with the company’s goals. This is generally based on profitability and financial performance. However, not all successful companies are profitable all of the time. There may be other metrics such as stability and recovery after a difficult financial period that the Chairman must consider.
If the CEO is not living up to expectations, the Chairman will lead the board in organising a replacement.
How do these roles vary between companies?
The power of these roles varies greatly between companies. It depends on the company culture and the role the Chairman wants to take. There are two main types of Chairman: an executive Chairman and a non-executive Chairman. Though they have some similar responsibilities, an executive Chairman is an employee of the company while a non-executive Chairman is not. The duty of a non-executive Chairman is overseeing the board and they remain at a distance from the company.
On the other hand, an executive Chairman has other jobs and takes a more active role in running the company. They may be a former CEO who wants to help the company move forward. For example, Robert Iger was the CEO of The Walt Disney Company until 2020, when he moved onto the role of Executive Chairman. Bob Chapek became the new CEO while Iger stayed in the role of Executive Chairman for a year to support the change.
Whatever the case, the best Chairman-CEO relationships are those that work together. This means they are working towards the same goals and have a similar idea of the techniques that should be used for this. Strong communication between the CEO and Chairman is extremely important.
Can one person be a CEO and a Chairman at the same time?
It’s certainly possible for one person to be both the Chairman and CEO! In fact, there are many famous cases like Jeff Bezos and Mark Zuckerberg. According to CEO World Magazine, the most influential CEO in the world last year was Jamie Dimon who holds both roles at JPMorgan Chase & Co. Of the top ten CEOs on their list, four are both Chairman and CEO at the same time.
Having a joint Chairman and CEO can streamline the decision-making process and create a clearer company culture. Especially in smaller companies, an individual with skill and passion can transform the fate of the business.
There are some drawbacks to having a joint role. It means the CEO will be discussing and voting on their own performance. As the board votes on the pay of senior management, a Chairman who is also the CEO would be involved in deciding their own pay. Governance watchdogs have encouraged greater separation between the board and the senior management.
Ultimately, the relationship between the Chairman and CEO will depend on your company. Every board has their own priorities and plans. Above all, the CEO and Chairman should always ensure good communication. A board portal like Convene will make these relationships easier. With smart features such as shared annotations, instant voting and action items, you can make sure your CEO and Chairman stay on the same page, even if they aren’t the same person.