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Chief executive officer

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"Chief executive" and "CEO" redirect here. For other uses, seeChief executive (disambiguation)andCEO (disambiguation).
Group ofFortune 500CEOs in 2015

Achief executive officer(CEO),[1]also known as achief executiveormanaging director,is the top-rankingcorporate executivecharged with the management of anorganization,usually acompanyor anonprofit organization.

CEOs find roles in various organizations, including public and privatecorporations,nonprofit organizations,and even somegovernment organizations(notablystate-owned enterprises). The governor and CEO of a corporation or company typically reports to theboard of directorsand is charged with maximizing the value of the business,[1]which may include maximizing theprofitability,market share,revenue,or another financial metric. In the nonprofit and government sector, CEOs typically aim at achieving outcomes related to the organization's mission, usually provided bylegislation.CEOs are also frequently assigned the role of the main manager of the organization and the highest-ranking officer in theC-suite.[2]

Origins

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The term "chief executive officer" is attested as early as 1782, when an ordinance of theCongress of the Confederationof theUnited States of Americaused the term to refer togovernorsand other leaders of the executive branches of each of theThirteen Colonies.[3]In draft additions to theOxford English Dictionarypublished online in 2011, theDictionarysays that the use of "CEO" as an acronym for a chief executive officer originated inAustralia,with the first attestation being in 1914. The first American usage cited is from 1972.[4]

Responsibilities

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The responsibilities of an organization's CEO are set by the organization'sboard of directorsor other authority, depending on the organization's structure. They can be far-reaching or quite limited, and are typically enshrined in a formal delegation of authority regardingbusiness administration.Typically, responsibilities include being an active decision-maker onbusiness strategyand other key policy issues, as well asleader,manager, and executor roles. The communicator role can involve speaking to the press and to the public, as well as to the organization's management and employees; the decision-making role involves high-level decisions about policy and strategy. The CEO is tasked with implementing the goals, targets and strategic objectives as determined by the board of directors.

As anexecutive officerof the company, the CEO reports the status of the business to the board of directors, motivates employees, and drives change within the organization. As a manager, the CEO presides over the organization's day-to-day operations.[5][6][7]The CEO is the person who is ultimately accountable for a company's business decisions, including those in operations, marketing,business development,finance,human resources,etc.

The use of the CEO title is not necessarily limited to describing the head of a company. For example, the CEO of a political party is often entrusted with fundraising, particularly for election campaigns.

International use

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In some countries, there is adual boardsystem with two separate boards, one executive board for the day-to-day business and onesupervisory boardfor control purposes (selected by the shareholders). In these countries, the CEO presides over the executive board and thechairpersonpresides over the supervisory board, and these two roles will always be held by different people. This ensures a distinction betweenmanagementby the executive board andgovernanceby the supervisory board. This allows for clear lines of authority. The aim is to prevent a conflict of interest and too much power being concentrated in the hands of one person.

In the United States, the board of directors (elected by theshareholders) is often equivalent to the supervisory board, while the executive board may often be known as theexecutive committee(the division/subsidiary heads andC-levelofficers that report directly to the CEO).

In the United States, and in business, the executive officers are usually the top officers of a corporation, the chief executive officer (CEO) being the best-known type. The definition varies; for instance, theCalifornia Corporate Disclosure Actdefines "executive officers" as the five most highly compensated officers not also sitting on the board of directors. In the case of asole proprietorship,an executive officer is the sole proprietor. In the case of apartnership,an executive officer is a managing partner, senior partner, or administrative partner. In the case of alimited liability company,an executive officer is any member, manager, or officer.

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Main article:Corporate title

Depending on the organization, a CEO may have several subordinate executives to help run the day-to-day administration of the company, each of whom has specific functional responsibilities referred to as senior executives,[8]executive officers or corporate officers. Subordinate executives are given different titles in different organizations, but one common category of subordinate executive, if the CEO is also the president, is thevice president(VP). An organization may have more than one vice president, each tasked with a different area of responsibility (e.g., VP of finance, VP of human resources). Examples of subordinate executive officers who typically report to the CEO include thechief operating officer(COO),chief financial officer(CFO),chief strategy officer(CSO),chief marketing officer(CMO) andchief business officer(CBO). Thepublic relations-focused position ofchief reputation officeris sometimes included as one such subordinate executive officer, but, as suggested by Anthony Johndrow, CEO of Reputation Economy Advisors, it can also be seen as "simply another way to add emphasis to the role of a modern-day CEO – where they are both the external face of, and the driving force behind, an organization culture".[9]

United States

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In the US, the term "chief executive officer" is used primarily in business, whereas the term "executive director" is used primarily in the not-for-profit sector.[10]These terms are generally mutually exclusive and refer to distinct legal duties and responsibilities.[11]The CEO is the highest-ranking executive in a company, making corporate decisions, managing operations, allocating resources, and serving as the main point of communication between the board of directors and the company.[12][13]

United Kingdom

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In the UK, chief executive and chief executive officer are used inlocal government,where their position in law is described as the "head of paid service",[14]and in business and in thecharitable sector.[15]As of 2013,the use of the termdirectorfor senior charity staff is deprecated to avoid confusion with the legal duties and responsibilities associated with being a charity director or trustee, which are normally non-executive (unpaid) roles. The termmanaging directoris often used in lieu of chief executive officer.

Celebrity CEOs

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Business publicists since the days ofEdward Bernays(1891–1995) and his clientJohn D. Rockefeller(1839–1937) and even more successfully the corporate publicists forHenry Ford,promoted the concept of the "celebrityCEO ".Business journalistshave often adopted this approach, which assumes that the corporate achievements, especially in the arena of manufacturing, are produced by uniquely talented individuals, especially the "heroic CEO". In effect, journalists celebrate a CEO who takes distinctive strategic actions. The model is the celebrity in entertainment, sports, and politics – compare the "great man theory".Gutheyet al.argues that "...these individuals are not self-made, but rather are created by a process of widespread media exposure to the point that their actions, personalities, and even private lives function symbolically to represent significant dynamics and tensions prevalent in the contemporary business atmosphere".[16]Journalism thereby exaggerates the importance of the CEO and tends to neglect harder-to-describe broader corporate factors. There is little attention to the intricately organized technical bureaucracy that actually does the work. Hubris sets in when the CEO internalizes the celebrity and becomes excessively self-confident in making complex decisions. There may be an emphasis on the sort of decisions that attract thecelebrity journalists.[17]

Research published in 2009 byUlrike Malmendierand Geoffrey Tate indicates that "firms with award-winning CEOs subsequently underperform, in terms both of stock and of operating performance".[18]

Criticism

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Executive compensation

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Main article:Executive compensation § Controversy

Executive compensation has been a source of criticism following a dramatic rise in pay relative to theaverage worker's wage.For example, the relative pay was 20-to-1 in 1965 in the US, but had risen to 376-to-1 by 2000.[19]The relative pay differs around the world, and, in some smaller countries, is still around 20-to-1.[20]Observers differ as to whether the rise is due to competition for talent or due to lack of control by compensation committees.[21]In recent years, investors have demanded more say over executive pay.[22]

Diversity

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Main article:Gender diversity § In the boardroom

Lack of diversity amongst chief executives has also been a source of criticism.[23]In 2018, 5% ofFortune500CEOs were women.[24]In 2023 the number rose to 10.4% of forWomen CEO's of Fortune 500 companies.[25]The reasons for this are explained or justified in various ways, and may include biological sex differences, male and female differences inBig Five personality traitsand temperament,sex differences in psychologyand interests, maternity and career breaks,hypergamy,phallogocentrism,the existence ofold boy networks,tradition, and the lack offemale role modelsin that regard.[26][27][28]Some countries have passed laws mandating boardroom gender quotas.[29]In 2023 Rockefeller Foundation awarded a grant toKorn Ferryto research strategies and then action a plan to help more women to become CEO's.[30]

Toxic executives

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See also:Toxic leader

There are contentious claims that a significant number of CEO's havepsychopathictendencies, often characterized by power-seeking behavior and dominance. These individuals can often conceal their ruthlessness and antisocial behavior behind a facade of charm and eloquence. Traits such as courage and risk-taking, generally considered desirable, are often found alongside these psychopathic tendencies.

Tara Swart, a neuroscientist atMIT Sloan School of Management,has suggested that individuals with psychopathic traits thrive in chaotic environments and are aware that others do not. As a result, they may intentionally create chaos in the workplace.[31][32]This perspective is explored in the bookSnakes in Suits,co-authored byRobert D. Hare.

However,Scott Lilienfeldhas argued that the attention given to psychopathy in the workplace by both the media and scholars has far exceeded the available scientific evidence. Emilia Bunea, writing inPsychology Today,has linked psychopathic traits in managers toworkplace bullying,employee dissatisfaction, and turnover intentions. Despite this, Bunea cautions that excessive worry about supposed psychopathic managers could discourage individuals from pursuing careers in corporations and deter employees from addressing issues with difficult Boss es.[33]

In a related development, British politicianAndy McDonaldreceived praise for educating a CEO on the role of trade unions. This occurred as the restaurant chainMcDonald'sfaced scrutiny in the UK Parliament over allegations of a toxic workplace culture.[34]

See also

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References

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  1. ^abLin, Tom C. W. (April 23, 2014). "CEOs and Presidents".UC Davis Law Review.SSRN2428371.
  2. ^Westphal, James D.; Zajac, Edward J. (March 1995). "Who Shall Govern? CEO/Board Power, Demographic Similarity, and New Director Selection".Administrative Science Quarterly.40(1): 60–83.doi:10.2307/2393700.JSTOR2393700.
  3. ^Journals of CongressArchived21 October 2015 at theWayback MachineRetrieved 30 December 2022
  4. ^"C, n.",Oxford English Dictionary Online(Oxford: Oxford University Press, 2011), underCEO n..Accessed 12 November 2022.
  5. ^"Chief Executive Officer - CEO".Investopedia.Investopedia US, a Division of IAC.Retrieved2014-10-23.
  6. ^"Chief Executive Officer (CEO)".BusinessDictionary.WebFinance Inc. Archived fromthe originalon October 16, 2020.RetrievedOctober 23,2014.
  7. ^Capstone Publishing (2003).The Capstone Encyclopaedia of Business.Oxford, U.K: Capstone Publishing. pp. 79–80.ISBN1-84112-053-7.
  8. ^Markus Menz (2011-10-04)."Menz, M. 2012. Functional Top Management Team Members: A Review, Synthesis, and Research Agenda. Journal of Management, 38(1): 45-80".Journal of Management.38(1). Jom.sagepub: 45–80.doi:10.1177/0149206311421830.S2CID143159987.Archived fromthe originalon 2016-04-08.Retrieved2012-11-28.
  9. ^"Rise of the Chief Reputation Officer".Financier Worldwide.Retrieved2018-12-30.
  10. ^Heaslip, Emily (2021-03-08)."Executive Job Titles một What Do They Mean?".uschamber.Retrieved2024-05-30.
  11. ^"The Difference Between an Executive Director & a Chief Executive Officer".Small Business - Chron.Retrieved2024-05-30.
  12. ^Dooley, Roger."What Is A Chief Executive Officer? CEO Role Explained".Forbes.Retrieved2024-06-24.
  13. ^"US CEO Definition".Law Insider.Retrieved2024-06-24.
  14. ^UK Legislation,Local Government and Housing Act 1989, section 4,accessed 9 December 2023
  15. ^"Association of Chief Executives of Voluntary Organisations".Acevo.org.uk. 2012-11-16.Retrieved2012-11-28.
  16. ^Eric Guthey and Timothy Clark,Demystifying Business Celebrity(2009).
  17. ^ Mathew L.A. Hayward, Violina P. Rindova, and Timothy G. Pollock. "Believing one's own press: The causes and consequences of CEO celebrity".Strategic Management Journal25#7 (2004): 637–653.
  18. ^ Malmendier, Ulrike;Tate, Geoffrey (14 June 2020)."Superstar CEOs"(PDF).p. 1.Archived(PDF)from the original on 11 September 2015.Retrieved11 September2021.We find that firms with award-winning CEOs subsequently underperform, in terms both of stock and of operating performance.
  19. ^"Executive Compensation Is Out Of Control. What Now?".Forbes.14 February 2018.Retrieved16 November2018.
  20. ^"CEOs in U.S., India Earn the Most Compared With Average Workers".28 December 2017.Retrieved16 November2018.
  21. ^"Great Men, great pay? Why CEO compensation is sky high".The Washington Post.12 June 2014.Retrieved16 November2018.
  22. ^Mooney, Attracta (11 November 2018)."European investors beef up stance over high executive pay".Financial Times.Archivedfrom the original on 2022-12-10.
  23. ^"'The government must act on ftse gender stats' says cmi's ceo ".CMI.14 November 2018.Retrieved16 November2018.
  24. ^"Fortune 500".Archived fromthe originalon Jan 22, 2019.Retrieved16 November2018.
  25. ^Hinchliffe, Emma (June 5, 2023)."Women CEOs run 10.4% of Fortune 500 companies. A quarter of the 52 leaders became CEO in the last year".Fortune.Retrieved2023-09-18.
  26. ^Cain, Áine (Jun 19, 2018)."A new list of the top CEOs 'for women' is mostly men — and it reflects a wider problem in business".Business Insider.Retrieved2019-10-13.
  27. ^Holmes, Michael (2019-09-06)."These are the reasons why we (still) don't have many women CEOs".Fast Company.The Conversation.Retrieved2019-10-13.
  28. ^Rossheim, John (28 March 2017)."It's 2017 – So Why Aren't there More Women CEOs?".Monster for Employers.Archived fromthe originalon Aug 2, 2021.Retrieved16 November2018.
  29. ^Clark, Nicola (27 January 2010)."Getting Women Into Boardrooms, by Law".The New York Times.Retrieved16 November2018.
  30. ^Stevenson, Jane Edison; Orr, Evelyn (2017-11-08)."We Interviewed 57 Female CEOs to Find Out How More Women Can Get to the Top".Harvard Business Review.ISSN0017-8012.Retrieved2023-09-18.
  31. ^McCullough, Jack (Dec 9, 2019)."The Psychopathic CEO".Forbes.Archivedfrom the original on Aug 20, 2023.
  32. ^Chamorro-Premuzic, Tomas (Apr 8, 2019)."1 in 5 business leaders may have psychopathic tendencies—here's why, according to a psychology professor".Make It.CNBC.Archivedfrom the original on Nov 24, 2023.
  33. ^Bunea, Emilia (May 12, 2023)."The Truth About Corporate Psychopaths".Psychology Today.Archivedfrom the original on 14 Dec 2023.
  34. ^Davenport, Hannah (2023-11-15)."McDonald's CEO gets schooled by MP on the role of trade unions".Left Foot Forward.Archivedfrom the original on Dec 5, 2023.

Further reading

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