Chairman vs CEO: 7 Biggest Differences Explained

 

BY: Pankaj Bansal, Founder at NewsPatrolling.com

The roles of Chairman and CEO often overlap in responsibilities and influence but are distinct in structure and scope. Here are the seven biggest differences:

1. Primary Responsibilities

• Chairman: Oversees the board of directors, sets the agenda for board meetings, and provides strategic guidance to ensure the company remains aligned with shareholder interests. The chairman has a supervisory role rather than day-to-day operational involvement.
• CEO: Manages the company’s daily operations, decision-making processes, and overall execution of the board’s strategic vision. The CEO focuses on the company's operational goals and ensures that business units work in alignment.

2. Role in Governance

• Chairman: Acts as a liaison between the board and management, ensuring that the CEO and executive team are accountable for achieving the company’s strategic objectives. The chairman represents the board in critical shareholder discussions.
• CEO: Answers to the board (and chairman) and has a significant role in formulating strategies with the executive team that they later present to the board for approval.

3. Authority

• Chairman: Holds authority over the CEO and other board members, particularly in voting scenarios or when setting long-term objectives. However, their influence on operations is more indirect.
• CEO: Has the highest authority over the company’s employees and departments and is responsible for driving the company’s operations toward its strategic goals.

4. Decision-Making Power

• Chairman: Primarily focused on high-level strategic decisions, major mergers and acquisitions, and other significant organizational changes. They consult with the board but usually don’t engage in daily decisions.
• CEO: Makes day-to-day operational decisions, often with the support of a leadership team. Their role is hands-on in adjusting business operations, hiring, budgeting, and project execution.

5. Accountability

• Chairman: Accountable to the shareholders and stakeholders for the performance of the board and the company’s direction, ensuring the CEO and management team meet expectations.
• CEO: Directly accountable to the board and must meet the objectives set by the board and report on the company’s performance.

6. Focus on Time Horizon

• Chairman: More concerned with long-term vision, corporate governance, and the sustainability of the company’s strategic direction.
• CEO: Has a mixed focus on both short-term goals and long-term objectives, managing quarterly performance while also building toward the future.

7. Succession Planning

• Chairman: Plays a key role in the CEO’s succession planning and may even lead the search for a new CEO when necessary.
• CEO: Involved in succession planning within the executive team but does not influence the chairman's role.

Conclusion

The chairman shapes governance and oversight, focusing on strategy from a high level, while the CEO directs the operational journey of the company. Both positions require strong leadership and collaboration, yet they distinctly influence the company in different ways.