The Difference Between a CEO & a Chairman of the Board
When the question of who is in charge of a company arises, the answer is not always clear. There are in fact two major roles within the firm: the CEO, who is in charge of making decisions about the running of the company, and the chairman of the board of directors, who oversees – and sometimes overrules – the CEO's decisions. Some firms also have a chief operating officer whose role is day-to-day management of the company.
The chairman is the head of a company's board of directors. In this role, the committee chairman definition is essentially someone who acts as the senior representative of shareholders and is responsible for upholding their interests. In the purest interpretation of company principles, the profitability of the company is the sole interest of the shareholders. In practice, the board of directors might also be expected to distinguish between the need to maximize profits in the immediate term, and the need to avoid actions that could harm the company's long-term stability and thus its ability to make profits in the future.
The chief executive officer's role is to be the senior decision-maker. In most cases this involves overseeing departmental managers – overruling them where the CEO feels necessary – while taking personal charge of major strategy decisions such as identifying and targeting audiences, changing marketing strategies or even taking over other companies.
The CEO effectively can be said to be running the company and is usually seen as the top person within the company. However, this power and status derives from the way the CEO role is carried out. The chairman holds superiority to the CEO. As well as having the right to overrule the CEO on major issues, the chairman – along with the rest of the board – makes the decision to hire or fire a CEO. The exact balance of power between a CEO and a chairman can vary from company to company. For example, in some companies, departmental heads are automatically members of the board of directors; the CEO can thus exercise some influence over the make-up of the board. It is possible for the same person to hold the role of chairman and CEO within a company. There is a strong argument that this promotes a conflict of interest and limits accountability, particularly in publicly traded companies.
Most companies have a separate role of chief operating officer, sometimes known as president. This role involves overseeing the day-to-day running of the company. In such a set-up, the CEO will thus be left to concentrate on "big picture" and long-term issues. Learn more about the differences between CEO and COO.