What is a CEO in a company, and what are their responsibilities?

Speaking of top positions within a company, one of the main roles we hear about more and more frequently is that of the CEO. But what is a CEO? Essentially, it is the chief executive, although they may also take on additional functions. Therefore, they are the top executive of a company, endowed with very broad powers, and accountable for their decisions only to the Board of Directors (BoD) and the owners.

What is a Chief Executive Officer?

To understand what a CEO is, let’s start with the meaning of this acronym in English.

The Chief Executive Officer is literally the executive head, that is, the person responsible for managing the company, its processes, and its performance. They make the key decisions and serve as the point of reference among the different departments of the company.

They may be the founder themselves, as in the case of Steve Jobs, Mark Zuckerberg, Elon Musk, or Jeff Bezos, but they may also be appointed by the owners or the Board of Directors, as in the case of Tim Cook, the current CEO of Apple.

In publicly traded companies, shareholder-owners appoint the Board of Directors, which in turn selects the chairman and the chief executive officer or CEO. The latter manages the company’s policies, represents the majority of the BoD, and is considered the primary person responsible for the results achieved. The chairman has a more representative role, while the CEO directly represents the interests of the shareholders.

Although they are often confused, the general manager and the CEO are not the same person. The general manager is in charge of other managers or individuals within the leadership structure. The CEO, on the other hand, is the highest operational position. Their role and influence are so significant that decisions to replace them often have major consequences for the company itself, its reputation, and its valuation on the stock market and in the broader market.

Functions of the CEO

After understanding what a CEO is, let’s look at their functions and main responsibilities, which are many. The CEO makes the decisions that determine how the business is run and sets overall objectives. They play a very important role, as they define the company’s overall vision, and their decisions translate into directives for all departments within the organization.

In smaller companies, this role tends to be more hands-on, directly making many business decisions, including those related to hiring new staff. However, in larger companies, the CEO focuses on corporate strategy and overall growth. More minor or specific decisions are delegated to other roles. The CEO’s responsibilities and functions within the company can be summarized as follows:

• Evaluates the organization based on various criteria and factors, determining how it is progressing and how it is structured, as well as assessing its financial and administrative aspects.
• After consulting with other executives, analyzes and proposes strategies for improvement, which can be implemented in the medium and long term.
• Proposes mergers and spin-offs, meaning operations through which the company can be divided into different subsidiaries. They may also propose a new distribution of shares among partners. Likewise, they can carry out mergers, combining the company with others following prior agreements and based on specific strategies.
• Leads the shareholders’ meeting: in this case, they are responsible for convening shareholder meetings when necessary, proposing the agenda and defining the objectives to be achieved.
• Oversees the budget: the CEO is responsible for preparing the company’s budget and presenting it to the assembly at the end of the year. This is the annual report related to overall income and expenses, a very important document because it provides a general overview of the company’s performance. Based on this data, different future strategies can be established, as well as the possible distribution of profits.

What skills does a CEO have?

As we have seen, the CEO has multiple responsibilities and must cover various functions. They are expected to respond in cases of corporate crises, legal proceedings, and may also face various risks due to their legal responsibilities toward the company. In fact, the CEO has signing authority, meaning they have the final say in authorizing any company action: purchases, sales, acquisitions, etc.

It is therefore clear that a CEO’s skills must be highly versatile and broad. These range from strong leadership and team management abilities to a high capacity for problem-solving and anticipating market trends. They must be able to introduce high levels of innovation and also have solid legal knowledge.

What to study to become a CEO?

These are the so-called soft skills that a CEO needs. From a technical standpoint, however, to perform this role a solid background in business administration and top-level management skills is required, ideally combined with deep knowledge and experience in the sector in which the company operates. Although this last point is not strictly essential, as there are many cases of CEOs leading companies in very different industries.

Therefore, in addition to field experience, this role typically involves completing training courses related to the business world, and almost always includes an MBA, such as an Executive MBA or a Global MBA, which ensures solid preparation and an international outlook applicable to multiple sectors.

Depending on the type of company, and whether they are an owner, shareholder, or appointed by the Board of Directors, the CEO may earn a fixed salary or a share of the company’s profits. Compensation is determined by the shareholders’ meeting prior to their appointment, but a CEO’s salary is usually very high, reaching several million euros, as demonstrated by the wealth of CEOs of companies such as Facebook, Apple, and Amazon.