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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.