Difference Between CEO and Chairman

Edited by Diffzy | Updated on: August 29, 2023

       

Difference Between CEO and Chairman

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Introduction

The business world, industries, factories and organizations are full of posts. Among them, the most important and top ones, considered the head of the administration or the owner of the entity, is a CEO/Chairman/Director, and so on. 

A CEO is somebody who, as a head of the executive, manages the executive staff and carries out the administration of a company or business entity. In contrast, the Chairman is the head of the Board of Directors. 

In fact, many times, the post of CEO and the Chairman is held by the same person. At other times, it may not. It depends on the workload and needs. 

In actuality, all these posts, particularly the CEO and Chairman, differ a little from each other in name and function for a multitude of causes. This is what we intend to discuss here.

Difference Between a CEO and a Chairman in Tabular Form

Here is a quick overview of the main differences between a CEO and a Chairman.

Point of Difference Chairman CEO 
Post Head of the Board of Directors Head of the Executive
Appointment Board of Directors, from amongst themselves. Board of Directors 
RoleManage the Board, maintain the stakeholders, and preside over Board meetings. Manage the day-to-day functions or administration of the company, profiteering and running the corporate structure. 
AccountabilityBoard of Directors Chairman and the Board. 

Before we move on to understanding the difference between the two (a CEO and a Chairman) in detail, it is important to gain insight into both these posts singularly. 

What is a Chairman?

A chairman or chairwoman, also called the chairperson or simply addressed as the Chair, is someone with the sheer responsibility of leading or chairing a board, committee, meeting, etc. 

Other terms include nomenclature as the President, facilitator, convenor, presiding officer, etc. As a matter of fact, the names differ from company to company and business to business. Depending upon the work a business performs, the head of the Board or committee may be addressed differently. 

Normally, the Chairman is an elected or nominated person who heads the group or company. In a board system, the Chairman is generally elected from amongst the members of the board by themselves. 

Though many times, the position of the Chairman is predestined or hereditary as well. For instance, most companies are chaired by their owners, then the next owner in line, son, daughter, etc., whoever is in line. However, this is something which could also happen with the post of the CEO. 

The main function of the Chairman is to regulate the Board of Directors in conducting its business. Members of the Board are generally stakeholders in the company, which makes their management crucial for the smooth running of the company. Further, the Chair heads the Board meetings or any such important meetings concerning the board and exercises considerable sway over them. 

This way, a Chairman is higher in order who does not work in the administrative structure of the company or any business entity, though he may at times enjoy considerable powers in presiding and managing Board meetings. 

Notably, several companies also appoint a vice-chairman or deputy chairman, depending upon the workload, management, and need. In

Types of Chairman 

All chairmen are associated with the Board. However, depending on their involvement in other functions or specifications, the post of a chairman can be divided into three different types. 

These are mentioned below in the following order. 

Chairman and CEO

The first type of Chairman forms a case where the Chairman also holds the position of the Chief Executive Officer or the CEO. Here, the Chairman is also the head of the executive besides being the head of the Board. 

Notably, the functions involve managing the Board, presiding over its proceedings, etc., while simultaneously managing the executive or administrative functions of the company. This income policy formulation and actions for profitability and corporate management. 

Small businesses generally incorporate a single person as both the Chairman and the CEO as it saves time and expense along with carrying the functions easily. 

Executive Chairman 

The next type of Chairman is termed an "Executive Chairman", depending upon his or her involvement in the executive functions of the company. 

An Executive Chairman is a person who is not the same as the CEO but someone who is the chairperson of the Board while also managing certain executive matters of the company. 

Generally, an executive chairman maintains the Board and also represents the company as its face in public meetings, etc. 

Non-executive Chairman 

The final type of Chairman is the "Non-executive chairman." Evidently, a non-executive chairman is not involved with any executive or administrative matters of the company. 

Such a chairman is only concerned with the smooth functioning of the board. This type of chairmanship maintains a clear and precise difference between the Chairman and CEO. 

What is a CEO? 

The CEO expands to the Chief Executive Officer. As the name suggests, a CEO is someone who is the head or chief of the executive or administrative order of any company or business entity. 

Unlike the Chairman, the main functions of the CEO involve executing the functions of administration and administering and managing all the officers in the hierarchy. All officers eventually have their reports submitted to the CEO. The CEO, in turn, reports to the Board. 

Notably, it is the CEO who is the noticeable or public face of the company. He or she acts as a link between the Board of Directors and the lower corporate strata of officers and employees. The actual management of the company comes within the main functional role of the Chief Executive Officer.

Besides managing the corporate structure of the company, it is the CEO who guides major policy decisions in favour of the business, driving profitability and seeing to it that the company works smoothly in the world competition. 

Generally, the CEO is appointed or chosen by the Board of Directors in harmony and thus, a chairman enjoys sway over who to choose as the CEO. Being an important figure in the overall management of the company, the CEO works carefully in building the company and taking it forward. Conversely, an incompetent CEO could drive the company's profits downwards and the company backwards. 

As required, most companies maintain a clear separation of powers between the CEO and the Chairman for smooth functioning and a better work environment.

Types of CEO 

Notably, there is not a clear division of CEOs found. On varied bases such as the type of functions or company objectives, way of working, etc., the post of CEO is divided into varied numbers. 

Based on the ideals of working and motivators behind the working of a CEO, there are six different types of CEO.

Finance-driven CEO

Such CEOs are driven by the main aim of providing the stakeholders value and making profits. 

Culture-driven CEO

Such CEOs support a friendly work environment and are approachable professionals. 

International Missionary 

Their main prerogative is to make their company a star in the corporate world, and they work with great and tough goals. 

Company Representative  

These CEOs are extremely dedicated to their company and take the initiative as the global representative of their company in the corporate world. 

Corporate Innovator 

Such CEOs are driven by innovative ideas to drive monetary gains. 

Business Executor  

They are examples of the classic CEO personality. They are hardworking, dedicated business professionals with their every work intended to benefit the organization. 

Main Differences Between a Chairman and a CEO in Points

While the CEO and the Chairman enjoy many similarities, such as a similar aim of taking the company forward and working for profits, owing responsibility to the Board, there are several differences between the two.

We shall understand these differences to carefully differentiate between the two.

  1. The CEO is the top-ranking executive of the company or the business entity, whereas the Chairman is the Head of the Board of Directors, who also holds stakes in the company.  
  2.  The Chairman looks over the entire strategic outlook of the company and is not generally involved in the day-to-day management. On the other hand, the CEO manages the day-to-day functions of the company and leads the administrative strata of the company. 
  3.  The Chairman presides over the meeting of the Board and sets the purpose or aim. The CEO leads the administration in achieving the set agenda and goals of the company. 
  4.  The Chairman owes responsibility only to the Board of Directors. The CEO is responsible to the Board of Directors, including the Chairman. 

It is notable how, in many cases, the same person holds both these positions, whereas in many others, different individuals are appointed to carry out the functions. 

Further, the functions, posts and responsibilities of the CEO and the Chairman differ from company to company. It is generally based on the country's laws, administrative structure, aims and needs, etc. 

Conclusion 

Summing up, the CEO and the Chairman are both top executives of the company with more or so similar accountability. As noted, both owe a responsibility to the Board of Directors for their strategy and key functional roles in the company's execution. 

Conversely, the CEO and the Chairman differ in their functions. Where the Chairman is the head of the Board and manages its proceedings, the CEO is responsible for carrying out the administration of the company and seeing its goals are met. 

In some companies, the same individual holds the role of both the Chairman and the CEO, whereas in many others, these posts are held by different persons. Also, the appointments and prerequisites for the positions differ in different countries and business entities. 

Nevertheless, each performs a unique set of functions and is important for the overall growth of the company. 


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"Difference Between CEO and Chairman." Diffzy.com, 2024. Mon. 04 Mar. 2024. <https://www.diffzy.com/article/difference-between-ceo-and-chairman>.



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