A:

In general, the chief executive officer (CEO) is thought of as the highest ranking officer in a company while the president is second in command. However, in corporate governance and structure, many permutations can take place, so the roles of both CEO and president may be different across various firms. For this reason it is important to have a general understanding of the corporate environment and how different positions ultimately fit into it.

First of all, the board of directors is elected by the shareholders of a company and is composed usually of both inside directors (senior officers of the company) and outside directors (individuals independent of the company). The board establishes corporate management policies and decides on "big picture" corporate issues. Because the board is in charge of executive functions, and as the CEO is responsible for integrating company policy into day-to-day operations, the CEO often (but not always) fills the role of chairman of the board.

Another factor that determines the positions of company officers is corporate structure. For example, in a corporation with many different businesses (a conglomerate), there may be one CEO who oversees a number of presidents, each running a different business of the conglomerate and reporting to the one CEO. In a company with subsidiaries, it would be unusual to have one person carry out the roles of both CEO and president.

Presidents often hold the position of chief operating officer (COO). The COO is responsible for day-to-day operations and has vice-presidents for different parts of the company reporting to him or her. Generally, the board of directors sets the policy; the president executes the policy and reports back to the board; and finally, the board reports back to the shareholders who are the ultimate owners.

A company without subsidiaries may have one person execute the roles of CEO and president (and perhaps even chairman). As such, greater communication and contact can be achieved between the board of directors which sets policies, and the president who oversees the day-to-day operations of the company. For example, Shantanu Narayen, Jeff Bezos, David S. Taylor, and Kazuo Hirai carry the title of both president and CEO at Adobe Systems (ADBE), Amazon, Inc. (AMZN), Procter & Gamble Co. (PG), and Sony Corporation, respectively.

Keep in mind that these are examples of general scenarios. The CEO is not always the chairman of the board, and the president is not always the COO. The ultimate goal in corporate governance is to effectively manage the relationship between owners and decision-makers and increase shareholder value.

For further reading on corporate structure, check out the article The Basics of Corporate Structure, Lifting the Lid on CEO Compensation and Get Tough On Management Puff.

RELATED FAQS
  1. Who is responsible for protecting and managing shareholders' interests?

    The average shareholder, who is typically not involved in the day-to-day operations of the company, relies on several parties ... Read Answer >>
  2. How do a corporation's shareholders influence its Board of Directors?

    Find out how shareholders can influence the activity of the members of the board of directors and even change official corporate ... Read Answer >>
  3. How are C-suite officers measured on performance?

    Find out how C-suite officers are evaluated. Learn about the evaluation process, what makes traits a CEO should exhibit and ... Read Answer >>
  4. How do the C-suite members work together to make a successful company?

    Learn more about the C-suite titles and how the executive team successfully runs a large or small organization. Find out ... Read Answer >>
  5. What is a staggered board?

    A staggered board of directors (also known as a classified board) is a board that is made up of different classes of directors. ... Read Answer >>
Related Articles
  1. Investing

    The Basics of Corporate Structure

    CEOs, CFOs, presidents and vice presidents – learn how to tell the difference.
  2. Managing Wealth

    What CEOs Actually Do

    CEOs are responsible for the overall operation of a business, and are usually elected by shareholders and the board of directors.
  3. Investing

    What Does the Board of Directors Do?

    Every public company must have a board of directors. These boards establish administrative policies including the hiring and firing of executives, the distribution of dividends, and executive ...
  4. Managing Wealth

    3 Reasons To Separate CEO And Chairman Positions

    Separating these high-profile positions can help to strengthen the overall integrity of a company.
  5. Investing

    Evaluating The Board Of Directors

    Corporate structure can tell you a lot about a company's potential. Learn more here.
  6. Managing Wealth

    Retired Execs: How Much Do Corporate Boards Pay?

    If you have the right skill set, getting a seat on a company board can be a lucrative and stimulating way to spend some of your new free time.
  7. Small Business

    Governance Pays

    Learn about how the way a company keeps its management in check can affect the bottom line.
  8. Managing Wealth

    How To Become A Corporate Board Member

    We look at how corporate boards are constructed, and how investors can get involved.
RELATED TERMS
  1. Chief Operating Officer - COO

    The senior manager who is responsible for managing the company's ...
  2. Board Of Directors - B Of D

    A group of individuals that are elected as, or elected to act ...
  3. Chief Executive Officer - CEO

    A CEO is the highest ranking executive in a company whose main ...
  4. Inside Director

    A board member who is an employee, officer or stakeholder in ...
  5. Executive Director

    The senior operating officer or manager of an organization or ...
  6. Corporate Governance

    The system of rules, practices and processes by which a company ...
Hot Definitions
  1. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
  2. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  3. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  4. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  5. Mezzanine Financing

    A hybrid of debt and equity financing that is typically used to finance the expansion of existing companies. Mezzanine financing ...
  6. Long Run

    A period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all ...
Trading Center