The question of whether a position exists above the Chief Executive Officer (CEO) stems from a confusion between management and governance within a company’s structure. While the CEO is the highest-ranking executive leading the company’s operations, they are fundamentally an employee hired to manage the organization. Therefore, the CEO does not represent the ultimate authority or ownership of the enterprise, setting the stage for positions that hold a higher level of oversight and control.
Defining the CEO’s Role and Scope
The Chief Executive Officer is the top executive officer responsible for the daily administration and operational success of the company. The CEO’s responsibilities include setting the overall strategic direction, ensuring profitability, and overseeing the execution of long-term plans. The CEO is tasked with making major corporate decisions, supervising the senior leadership team, and serving as the public face of the organization. The CEO is ultimately an employee of the corporation, accountable to those who hold the company’s ultimate control. The board of directors typically appoints and compensates the CEO for their services.
The Immediate Authority: The Board of Directors
The most direct answer to the question of a higher position is the Board of Directors (BoD), which acts as the governing body of the corporation. The board is responsible for corporate governance, providing oversight, setting broad policies, and ensuring the company operates in the best interest of its stakeholders. The BoD defines the company’s overall strategic objectives and monitors management performance, including that of the CEO.
The board hires, evaluates, and can remove the CEO if performance is unsatisfactory. It also has the authority to approve major transactions, such as mergers, acquisitions, and the issuance of dividends. This structural arrangement places the board above the CEO, as the board provides direction and guidance while the CEO is responsible for day-to-day operations and execution.
The Leadership of the Board: The Chairman
Within the governing body, the Chairman of the Board leads the directors and manages the governance function. The Chairman is responsible for setting the board’s agenda, running meetings, and ensuring the board functions effectively in its oversight role. This individual has higher governance authority than the CEO, even if the CEO is also a board member. The Chairman promotes the interests of the shareholders and ensures accountability from the management team.
In many public companies, there is a debate regarding the separation of the CEO and Chairman roles, known as “CEO duality” when combined. Splitting the roles means the CEO focuses solely on operational management while an independent Chairman leads the board. This separation is viewed as a best practice for corporate governance, as an independent Chairman can provide objective guidance and monitor management performance. Companies that combine the roles argue it provides a more cohesive strategy and streamlined authority, but the trend is toward separation to enhance board independence.
The Ultimate Authority: Shareholders and Owners
The ultimate source of power in a corporation rests with the shareholders in public companies or the owners in private companies. Shareholders exercise their authority primarily through voting rights on key decisions, such as the election and removal of the Board of Directors. By controlling the composition of the board, shareholders indirectly control the entity that hires and supervises the CEO.
Owners delegate the responsibility of oversight to the board, which in turn hires the executive management team. Shareholders also have the right to propose resolutions and approve major corporate actions, demonstrating that their power supersedes both the CEO and the board itself. While a small, individual shareholder may have little direct influence, the collective power of all owners represents the highest tier of corporate control.
Common Confusion: Other C-Suite Roles
Titles like President, Chief Operating Officer (COO), and Chief Financial Officer (CFO) are often mistaken as superior positions to the CEO due to their high rank in the corporate hierarchy. These executive roles belong to the C-Suite, but they generally operate under the CEO’s direction. The CEO is the top-ranking executive, and most other C-Suite members report directly to them.
The COO is typically considered second in command, concentrating on day-to-day internal operations and implementing the CEO’s strategic plans. The CFO oversees the financial health of the company, including budgeting and risk management, and acts as a primary partner to the CEO in value creation. These roles are executive management positions focused on specific functional areas, not as a source of higher authority or governance.