This Chief Executive Officer (CEO) Essay example is published for educational and informational purposes only. If you need a custom essay or research paper on this topic, please use our writing services. EssayEmpire.com offers reliable custom essay writing services that can help you to receive high grades and impress your professors with the quality of each essay or research paper you hand in.
A chief executive officer (CEO), also known as a managing director, general manager, chief executive, or president, is generally the most senior executive or administrator in charge of managing an organization. In the past, the term was normally restricted to profit-making corporations, but now, it is increasingly applied to the most senior manager in not-for-profit organizations, such as charities, and even in government departments and agencies. The responsibilities of the CEO, as the highest-ranking executive, include developing and implementing organizational strategies, making major organizational decisions, managing the overall operations and resources of the organization, and acting as the main point of communication between the board of directors, representing shareholders as the firm’s owners, and the organization’s day-to-day operations. In a government department or agency, this reporting may be to an elected body, an official, or a statutory board. The CEO in a corporation will often have a position on the board, and in some cases, he or she may even be the chairperson. In smaller companies, the CEO will have a much more hands-on role in the company, making many business decisions. However, in larger companies, the CEO will usually deal with only the higher-level strategy of the company and focuses on directing its overall growth, with most other tasks delegated to other managers.
A CEO’s responsibilities can vary considerably from organization to organization. They typically include the following: first, creating, communicating, and implementing the organization’s vision, mission, and overall direction and leading the development and implementation of the organizations overall strategy; second, leading, guiding, directing, and evaluating the work of other executives in the organization, including presidents, vice presidents, and directors, depending on the organization’s reporting structure; third, soliciting advice and guidance from the corporation’s board of directors, or the governing or supervising body for not-for-profit or government organizations, and reporting on the organization’s performance and strategy; fourth, formulating and implementing the strategic plan that guides the activity of the organization; fifth, overseeing the complete operation of an organization in accordance with the direction established in the strategic plans; sixth, maintaining awareness of both the external and the internal competitive landscape, opportunities for expansion, customers, markets, new industry developments and standards, and so on; seventh, representing the organization in civic activities in the community and professional associations in the industry and acting as the face of the organization when dealing with the organization’s stakeholders, including governments, customers, suppliers, creditors, workers, and others; and finally, demonstrating the leadership necessary to make the organization a success in whatever objectives it has set. This leadership includes providing vision, attracting followers, and all other aspects of successful leadership.
Given the responsibilities of CEOs, those acting in the role generally require high-level, relevant, and developed skills; a high level of education (often a master’s degree, typically in business administration); and substantial experience. The remuneration of CEOs is generally in line with these expectations. PayScale Inc., a salary, benefits, and compensation information provider, provides a useful overview of this information by country for survey-reporting individuals. For example, in the United States, the median salary for a president and CEO in June 2014 was $150,016 per year, not including bonuses, profit sharing, and commissions, yielding a total pay of up to $352,824, but not including equity (stock) compensation, the cash value of retirement benefits, and the value of other, noncash benefits (e.g., health care). In general, the survey indicated that experience has a moderate effect on income for CEOs, with 27 percent of CEOs having 10 to 19 years of experience in related positions, usually as senior managers and executive directors, and 56 percent with 20 or more years of experience. Some 85 percent of the reporting individuals in the most recent survey describing themselves as CEOs were males, with the typical high-demand skills for CEO positions declared being business strategy, financial management, strategic planning, team leadership, and leadership.
Another survey, this time by Pricewaterhouse Coopers, the world’s second-largest professional services network, throws a different perspective on the major decisions undertaken by global CEOs. In the most recent survey for January 2014, the results indicate that some 76 percent of respondent CEOs had undertaken a cost reduction initiative in the past 12 months, 34 percent had entered a new strategic alliance or joint venture, 25 percent had outsourced a particular business process or function, and 38 percent had completed a merger and acquisition. This survey also highlighted some of the challenges CEOs need to be aware of when managing an organization. For example, more than 30 percent of CEOs responded that they were leading major transformations in organizational design and structure or technological investment, customer growth and retention strategies, or corporate governance. Likewise, 52 percent of global CEOs responded that they had improved relations with customers, 43 percent with the providers of capital, and 42 percent with their supply chain in the past 5 years, but another 31 percent responded that relations had worsened with governments and regulators and 23 percent with the media over the same period.
As the public face of an organization to its stakeholders, CEOs, especially those in large, publicly listed corporations, are almost as well known as the company itself. This is especially the case with companies where the CEO is also the chair of the board and/or the founder. Particularly well-known current CEOs include Michael Dell, chairman of the board, CEO, and founder of Dell; Mark Zuckerberg, CEO and founder of Facebook; Rupert Murdoch, founder and CEO of News Corp; Larry Page, founder and CEO of Google; Robert Iger, chair and CEO of Disney; and Warren Buffett, founder and CEO of Berkshire Hathaway.
In the recent past, this list would also have included Michael Bloomberg of Bloomberg, Steve Jobs of Apple, Jack Welch of General Electric, and Bill Gates of Microsoft. Similarly, many leading CEOs have written best-selling books about their experiences as CEOs, providing useful guidance for the hopeful want-to-be. These include Winning by Jack Welch, Direct From Dell: Strategies That Revolutionized an Industry by Michael Dell, Work in Progress by Michael Eisner, Sam Walton: Made in America by Sam Walton, Iacocca: An Autobiography by Lee Iacocca, and Grinding It Out: The Making of McDonald’s by Ray Kroc.
This leads to several areas relating to CEOs particularly contested in recent years, especially in the United States, concerning the fundamental nature of ownership and management in the firm and the separation of the roles of CEO and chair of the board. To start with, agency relationships characterize modern corporate governance in that the owners of firms (shareholders or equivalent) as principals hire CEOs as agents to manage the firm on their behalf professionally. Assuming that CEOs are rationally interested in furthering their own ends, the central problem for shareholders is how to motivate the managers to act in shareholders’ interest, not that of their own, typically in terms of shareholder wealth maximization. Evidence of CEOs pursuing rational self-interest rather than shareholders’ interests includes shirking (not working hard), excessive consumption of perquisites, manipulation of earnings, excessive diversification, bias toward investments with near-term payoffs, and underemployment of debt. A variety of mechanisms provide incentives for managers in this regard. First, markets for corporate control discipline CEOs to better shareholder interests or risk their position because of the hostile takeover of an underperforming firm. Second, the market for managerial talent entails incentive compensation in the form of stock options and performance-related pay, effectively turning CEOs into shareholders. Last, management decisions are actively monitored in compliance with shareholder wealth maximization. Primarily, this is done through the firm’s board of directors, and also through institutional and block shareholders, and indirectly through banks and other debt holders. However, any or all of these mechanisms may break down or be compromised.
The second area is the combination (or separation) of the chair and CEO roles. After the recent financial crisis, corporations came under fire from activist shareholders, institutional investors, proxy advisory firms, and regulators to separate the chair and CEO roles with a view to achieving independent leadership on the board. In the most common agency theory argument, the separation of the chair and CEO roles increases the board’s independence from management and thus leads to better monitoring and oversight. Because the CEO manages the company and the chair leads the board in overseeing (hiring, compensating, and replacing as necessary) the CEO on behalf of the shareholders, holders of this view see a conflict of interest if a single person occupies both the CEO and chair roles. In contrast, stewardship or administrative theory suggests that the benefits of this separation are not so clear-cut. Drawing on the principle of “unity of command,” stewardship theory argues that having clear and unambiguous authority concentrated in one person is essential to effective management. Unity of command creates clear lines of authority to which management (and the board) can respond more effectively. Clearly, both of these conceptualizations of the role of the CEO have important implications for the role and behavior of CEOs in the real world.
- Fox, Jeffrey J. How to Become London: Random House, 2010.
- Michaelson, Gerald A. and Steven Michaelson. Sun Tzu— The Art of War for Managers: 50 Strategic Rules Updated for Today’s Avon, MA: Adams Media, 2010.
- Miles, Robert The Warren Buffett CEO: Secrets From the Berkshire Hathaway Managers. New York: John Wiley & Sons, 2003.