28 September 2016

Different between CEO and Chairman

So what's the difference? And why is it important to know?

CEO (Chief Executive Officer) as the name implies; is a company top decision maker and all other executives report to him or her. CEO/President usually delegates most of the tactical tasks to other managers, so that he/she can focus on adopting strategies for company i.e which competition to take on, when and which markets should they target, should they go for M&A (merger and acquisition) or partnerships with other companies etc. All CEO are accountable to the BOD (Board of Directors) for the company performance.

Chairman is the head of its BOD of a company. The board is elected by shareholders and their main duty us to protect investors' interests; such as the company's stability as well as profitability. Chairman usually meets BOD multiple times per year to set long-term objectives, evaluate performance of keys managers, review financial results and vote on essential strategic decision proposed by CEO. Directors that are appointed can also fire key managers such as the CEO and president. Chairman normally has substantial power in setting the board's agenda and determine the outcome of votes. The main thing is that Chairman does not necessarily play an active role in everyday management.

The chairman of the board is technically a CEO's superior as the CEO can't make major moves without the board's consensus and his/her job security will depends on their satisfaction. In another word, chairman is the ultimate boss of the whole company's structure. CEO can also affect the composition of the BOD through his/her selection of senior executives, many of them are confirmed board seats by company bylaws.

After reading through, now you know the main differences between CEO and Chairman. Its important to know because if you had purchased any shares of a listed company and you are one of the substantial shareholders, you might be able to determine the fate of the BOD.

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