A chief executive officer (CEO) is the highest-ranking position in an organization and responsible for implementing plans and policies related to a company’s financial strength, operational efficiency, business transformation and strategic management.
The CEO is ultimately responsible for the company’s success or failure. They oversee its various functions, including operations, finance, marketing, sales, human resources (HR), legal, compliance and IT. They do all this while balancing the needs of employees, customers, investors and other stakeholders.
The CEO title most often applies to for-profit businesses whose size, in terms of employee numbers or revenue, justifies this top position. Some nonprofit organizations also choose to have their most senior person hold the CEO title.
In some cases, business laws require the use of the CEO title. Corporations, by law, must have CEOs, other chief officers and boards of directors. A limited liability company can structure itself like a corporation and have a CEO, but the role isn’t required by law. Other types of businesses and nonprofits have their top executive fulfill the duties of a CEO but use titles such as president or executive director.
CEO roles and responsibilities
Although a CEO’s responsibilities are generally similar from one organization to the next, exact duties vary based on several factors, including the company’s size and whether it’s public or privately held. The CEO of a startup or a small family business generally performs more hands-on work and management tasks than the CEO of a large company. In some cases, particularly smaller businesses, the CEO might also be the owner.
In a larger organization, the board of directors generally hires the CEO, determines compensation and evaluates performance. The CEO, who can also hold the position of company president or board chairman, is expected to regularly keep the board informed of corporate affairs.
Among the CEO’s key tasks are developing, communicating and implementing corporate policies and initiatives. A company’s plan of action must be defined in terms of which budgets, investments, markets, partnerships and products, among others, to pursue and implement to best fulfill the organization’s primary mission. Usually, this mission is to maximize profits, but it could also be humanitarian, philanthropic or other types of goals, as applies to nonprofits and some for-profit enterprises.
Other important CEO tasks include organizing business leaders and staff to meet strategic goals, comply with laws and regulations, manage risk, identify and deliver value to the various stakeholders, and lead the organization at all times but especially during a crisis.
Career path to becoming a CEO
The path to becoming a CEO involves a combination of factors, including education, leadership skills acquired over time and experience performing other related roles. These roles include project manager, operations manager and head of various units.
CEOs typically have bachelor’s degrees in economics, business or related fields. Some have a master’s degree in business administration or advanced degrees, such as engineering or computer science. Education is an important aspect, but it also takes years and, in most cases, decades of experience in an industry and in leadership positions to become a CEO.
Holding other high-ranking positions in an organization can give a person seeking the CEO title the necessary leadership skills. Serving as a manager, director or other C-level position overseeing large units or operations of a company is a critical step. In the case of small businesses, a founder or co-founder might eventually be named CEO as the business grows larger.
How the CEO’s pay differs from other employees
A CEO’s pay normally exceeds that of a regular employee in several ways:
- Salary. Average salaries for CEOs are typically much higher than regular employees — on an exponential scale.
- Bonuses. CEOs can receive either a fixed amount for a bonus or performance-based bonuses, which are often tied to growth in revenue, profits and stock price.
- Stock options. CEOs typically have more stock options available to them than their employees. As with bonuses, these options can boost total compensation significantly.
- Ownership of company shares. CEOs are often encouraged and sometimes even required to own a significant percentage of their companies’ shares. This is seen as a way to provide an incentive for CEOs to increase productivity, which can, in turn, boost the company’s stock price and market value.
Differences between a CEO and owner of a company
CEO is a functional title with daily leadership duties and responsibilities, while ownership is a legal designation.
The board of directors usually selects the CEO, who serves in the highest-level staff position, A business owner is typically the founder, considered the sole proprietor and entrepreneur who owns most or all the company and is in charge of all business functions. In a publicly traded company, the shareholders are the owners, and the CEO is the employee who shareholders hold accountable for the company’s performance through the board of directors.
A CEO can be an owner, and an owner can be a CEO. So, the roles aren’t mutually exclusive. Successful CEOs and owners often possess similar traits, including business acumen, critical thinking, interpersonal communication skills, passion for the job and loyalty to the company. They also may be responsible for filling high-level positions in their organizations.
An owner can play a passive role in the business, providing guidance and advice to the CEO, or a direct role by managing some or all business functions. The CEO almost always has a direct role in the business with responsibility for day-to-day oversight and the company’s success or failure.
CEO’s role in staff hiring and retention
The CEO is also responsible for hiring C-level members of the executive team and firing those who don’t achieve standards the CEO sets. The C-level officers who the CEO hires and works directly with include the following:
- Chief financial officer. The CFO addresses financial planning and risk management.
- Chief operating officer. The COO oversees business operations.
- Chief technology officer. The CTO handles technology requirements.
- Chief information officer. The CIO manages IT investments, processes and operations.
- Chief marketing officer. The CMO is responsible for marketing and sales.
- Chief data officer. The CDO manages data science and analytics,
- Chief compliance officer. The top compliance officer controls policies and procedures that ensure compliance with laws and regulations that affect an organization, as well as internal policies.
- Chief HR officer. Also sometimes referred to as the chief people officer, the CHRO oversees HR and talent management.
These executives help the CEO formulate business strategies and implement the policies and directions the CEO favors. They manage their functional areas on the CEO’s behalf.
CEOs promote a company’s culture, determining the attitudes, behaviors and values that best represent the organization’s mission. They model those characteristics, ensuring management’s support and recognizing the value and contributions of each employee.
Similar C-suite positions
The CEO is part of the C-suite executive staff that sets the company’s strategy. While most of an organization’s lower-ranking employees require technical know-how, C-suite executives must possess leadership and team-building skills. C-suite executives also often require a high-level of business acumen because their decision-making has a major influence on an enterprise’s overall direction and success.
Other top C-suite positions include the CFO, COO and CIO:
- The CFO compiles budgets, tracks expenses and revenue, analyzes financial data and reports this information to the CEO. The CFO is also the company’s liaison with banks, investors, lenders and financial institutions with which the company does business.
- The COO oversees operations and day-to-day functions, particularly in large organizations. The COO reports directly to and advises the CEO and also works closely with the CFO and CIO.
- The CIO manages IT strategy and implementation, overseeing the hardware, software and data that help other members of the C-suite do their jobs effectively. The CIO must research new technologies, identify ways technology can provide business value, and address the risks and rewards associated with digital information.
There are other C-suite positions with titles such as chief digital officer, chief data officer and chief marketing officer, but the exact titles and roles vary. For example, a healthcare organization would require a chief medical officer, and cutting-edge technology companies often employ a chief innovation officer.
Examples of successful CEOs
The best CEOs excel at innovation, disrupting industries, improving the financial success of their companies and improving the lives of their employees and society. In technology, for example, successful CEOs demonstrate a unique vision, longevity and tenacity — and, at times, generate controversy. They can attain iconic status if their brands become household names.
Steve Jobs
Jobs co-founded Apple in 1976 with the mission of contributing to society by making tools for the mind that advance humankind. While CEO of Apple, the company developed breakthrough products, such as the Macintosh computer, iPhone and iPad, and revolutionized digital music through iTunes.
Apple, however, had its share of financial problems in the 1990s and approached bankruptcy partly due to Mac clones cutting into sales. Jobs was brought back as CEO and set about reinventing the computer maker. His ambition and vision transformed Apple into one of the world’s most successful and influential companies at the time of his death in 2011. In 2018, Apple became the first publicly traded U.S. company to reach $1 trillion in valuation.
Jeff Bezos
Bezos walked away from a hedge fund job in 1994 and founded Amazon, which began as an online bookstore operating in his garage, to take advantage of the rapid growth in internet use. Bezos’ vision transformed Amazon into an “everything store,” where customers could buy a range of products.
To optimize the customer experience, the online retail giant offered more book titles than those found in brick-and-mortar bookstores, provided perks like one-click shopping, and published good and bad product reviews. These practices are common now, but they were revolutionary in 1997 when Amazon went public.
The company entered the grocery business and substantially increased its footprint as a brick-and-mortar retailer with the purchase of Whole Foods in 2017. Amazon is the world’s largest retailer and marketplace, smart speaker provider and cloud computing service through Amazon Web Services. Bezos stepped down as Amazon CEO in 2021 to become executive chairman.
Elon Musk
Musk is the CEO of Tesla and SpaceX and founder of several other businesses, including the company that is now PayPal and the social media company X, formerly Twitter. Musk joined Tesla as chairman and product architect in 2004 and became CEO in 2008. Tesla introduced the Roadster sports car in 2006, Model S sedan in 2012 and less-expensive Model 3 in 2017, which became the best-selling electric car of all time.
Believing that humanity must learn to live on other planets to survive as a species, Musk founded SpaceX as CEO and chief designer in 2002, and he set out to make rockets reusable and more affordable. SpaceX’s Dragon spacecraft has carried astronauts and supplies to the International Space Station. The Super Heavy Starship system is expected to be a spacecraft designed for rapid transportation between cities on Earth and travel to the moon and Mars.
The future of the CEO role
The role of CEO was once mostly focused on maximizing productivity and appeasing stakeholders. Now, with company culture and employee well-being coming into greater focus, the CEO must also prioritize employee retention or risk losing them to competitors. This entails being adept in business and entrepreneurship but also understanding people management issues in ways they haven’t had to in the past.
Also, disruptive technologies, like artificial intelligence and Industry 4.0, are part of a changing landscape for CEOs. They must be knowledgeable about new technologies and help their companies take the right steps to gain a competitive advantage.
In addition to current C-suite titles, CEOs must consider the possibility of appointing a chief AI officer. Learn what they are and who could fill the position.
