Difference Between CEO and Executive Director

Edited by Diffzy | Updated on: May 08, 2023

       

Difference Between CEO and Executive Director

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CEO vs. Executive Director - Quick Difference

The fundamental difference between a CEO and an Executive Director is in their titles and organizational positions.

A company's CEO makes significant decisions, runs operations, and sets its strategic direction. Financial performance and growth are the CEO's responsibility.

An Executive Director manages a nonprofit, government agency, or association's daily activities. They establish and implement policies and programs, manage finances, fundraise, and engage stakeholders. An Executive Director is accountable to the organization's Board of Directors or governing body.

In general, CEOs run for-profit enterprises, whereas Executive Directors run nonprofits or government bodies.

Introduction

The world has evolved thanks to authority figures who have ruled and managed resources, and people have always tried to improve in various ways. As expected, emerging companies and organizations also require effective strategies and plans to succeed. There are positions of power in these organizations, such as board of directors, executive director, chief financial officer (CFO), chief executive officer (CEO), and managing partner, among others. Private, government, for-profit, non-profit, corporate, and non-corporate companies all post such jobs. These positions play a vital role in ruling the respective organizations. They make difficult decisions, use organizational resources effectively to fulfill their duties, and plan for the organization's better future.

Organizational structures may vary in how they position these roles. However, regulatory boards have laid down rules that give everyone some rights in important matters concerning the organization. The Board of Directors is at the top of the structure, and the CEO or Executive Director manages the board of directors. This is followed by the general manager and then the managers. Most businesses adhere to this chain as directed by regulatory boards. The first regulatory body was established by Congress in 1887 to regulate railroads, inland waterways, and oil companies.

CEO vs. Executive Director

The word "CEO" was first cited in the 1972 edition of the Oxford English Dictionary. However, only one man was elected as CEO of a Fortune 500 company in 1955; the rest of the companies have named the position of President or Chairman. Clearly, after 1975, every company designated their CEO as their leader. Since then, the name "CEO" has been given to the head of the company or the owner of the company. Many different countries have some minor differences, such as the fact that some countries might have one CEO for an organization, while others might have two or three CEOs in charge of the same organization.

Unlike the CEO, the Executive Director has been with the board of directors since its inception in the 16th century. The board was considered a table around which people gathered to discuss important matters. But with changing society, the meaning of the word changed; later on, the board was considered a meeting of important people. According to modern management, the board of directors was first recorded in 1712. And, because the term "executive director" has spread around the world,

The main difference between the CEO and ED is that the CEO is answerable to the board of directors and works under their authority, while the ED is the one who authorises and monitors the functioning of the board of directors. And many of the differences and functionality, roles and responsibilities, pay scale, and everything else will be highlighted below two roles. 

Difference between CEO and Executive Director in Tabular form

Parameters CEO Executive Director
Meaning The Chief Executive Director is the company's managing partner, or the highest-ranking executive. The executive director as well as the higher-ranked executive are followed by the CEO of the company.
Sector-wise The CEO has a role to play in private organisations and companies, profit-making organizations, and maybe in some start-ups. On the contrary, the executive director is the one who leads the non-profit organizations, government bodies, and maybe even the private sector.
Roles The role of the CEO is to make better plans and decisions for increasing production and maintaining the public image for profit. Since the ED is working under a non-profit organization, its main role is to build public awareness, fundraise, and deal with any overseas business, if any.
Responsibility The CEO is required to look after the plans, policies, and strategies and improvise and make changes to them, if need be, and make effective use of the firm's resources. The ED looks after the day-to-day functioning of the work and manages the business policies, profit maximization, and time management.
Scope The Chief Executive Officer is superseded by the Board of Directors. The executive director is the head of the board of directors.
Another Name The Chief Executive Officer is also known as the Chief Administrative Officer. The Executive Director is also known as the Managing Director, since the ED is the one who manages the Board of Directors.
Answerability The CEO is not responsible for answering questions from the company's shareholders and bondholders. The ED is responsible for answering all the valid questions asked by the bondholders and shareholders of the company.

What is a CEO? 

The Chief Executive Officer (CEO) is the highest-ranking executive in the company, whose role it is to plan out a company's overall strategies and policies and, by using the company's resources, help make strong decisions for the future. The other pattern of the hierarchy might differ from company to company, but the position of CEO remains the highest in all the companies. The CEOs are elected by the boards of directors of their respective companies.

The role of the CEO could also differ depending on the company's size, culture, corporate structure, and work nature. The primary role of the CEO of any company is to make high-level strategic decisions to help the company better reach markets, drive profitability, improve work operations, manage time, and meet with the underlying executive for further progress and development, among other things.

Sometimes, for the election of the CEO along with the Board of Directors, some of the huge shareholders also have the right to vote in such matters, as do general shareholders. The decision of whom to include in the election process is made by the board of directors itself. And the shareholders report their data to the chairman of the board of directors, who is appointed by shareholders.

The Chair of the Board (COB) may not influence the board members, but the board of members does have the right to overrule the CEO's decision. Sometimes, the CEO and chair of the board can be the same person, but many companies prefer to split the roles in consideration of avoiding one ruling authority.

The studies show in the report that 45% of the company's performance is impacted by the CEO, and the other 15% depends on the variability of the profit earnings; later on, it comes down to the work culture, office premises, and so on.

The CEO can gain notoriety due to their frequent dealings with the public, overseas meetings for new plans for the growth of a respective company, and also due to their earnings. The examples of such CEOs are quite long, but to name a few, there are Elon Musk, Steve Jobs, Gautam Adani, Warren Buffet, Mukesh Ambani, Sundar Pichai, and many more. The average annual income of the CEO has skyrocketed. For the aforementioned CEO, the average annual income starts at around $185 billion (for Elon Musk), $134.8 billion (for Gautam Adani), $111.8 billion (for Jeff Bezos), and so on.

What is an Executive Director?

The executive director is the same as the CEO at non-profit organizations, government agencies, or international organizations. The executive director is the senior operating officer or manager of an organization, whose scope of work is similar to that of the CEO of any for-profit company. The executive director is also responsible for strategic planning, making strong decisions, working with the resources in the organization, and meeting similar views and opinions with the board of directors.

The executive director reports directly to the board of directors, and they also must carry out the board's decisions. However, due to the executive's daily involvement in the organization's management activity, some of these responsibilities are shared with the Chief Operating Officer (COO). As you know, the Executive Director is the CEO of the non-profit; their jobs include fundraising, promotion the organization, raising public awareness, and boosting membership in the organization.

Unlike the CEO, the executive director is only appointed by the board of directors, and in some rare cases, a member of an organisation may be approached for approval. The Executive Directors are generally paid for the NPOs that have more public awareness and have a good number of members, but for the NPOs that are small and have just started, the Executive Directors opt for a volunteer basis only.

The executive director should be as firm as a rock since his knowledge helps in fundraising, dealing with overseas business, building up portfolios, maintaining reputation, and whatnot. All these things will swiftly work out when the leading partner has expertise in handling all the aforementioned situations. The executive director has greater and direct access to all the information in the organization to help make decisions effortlessly.

The Executive Director doesn't gain as much fame as the CEO of a company does, as they are not listed in the Forbes List of the top 10 richest people. That is not all; they can gain fame and fortune at the local and national level like a venture, a 10-year-old company, and many more as such. Although the highest an executive director gets paid is nearly $15 billion annually, the previous number is for the owner of a non-profit or venture, but the executive director of a reputed company like Tesla gets nearly $1.5–3 million on an annual basis.

Main Difference between CEO and Executive Director in Points

  • The main difference, as stated in the above paragraphs, is that the CEO is the one who supersedes the Board of Directors, unlike the Executive Director, who is the one who leads and monitors the functions and performance of the Board of Directors.
  • The CEO is not answerable to the corporate debtor, unsecured creditors, or bondholders, but the ED is fully accountable for responding to any valid shareholder or bondholder questions.
  • The Chief Executive Officer is also known as the Chief Administrative Officer; likewise, the Executive Officer is also known as the Managing Director, as he is the one who manages all the actions of the board of directors.
  • There is a communication line between the CEO and the Board of Directors, i.e., the company secretary. The secretary briefs the board on the work conducted by the CEO. No such line of communication is required between the ED and the Board of Directors.
  • The CEO is the highest-ranking executive of any company and is responsible for looking after the improvement of policies created by the ED and Board of Directors, if need be, managing the resources and clients effectively to increase profits, improve work operations, and make high-level strategic decisions. The ED, on the other hand, oversees the day-to-day activities of the firm's general manager and managers, makes efficient use of time and delegates this to the managers below, raises public awareness, handles fundraising, and conducts international business.
  • The actions of the CEO are supervised by the Board of Directors, and sometimes even the plans and policies finalised by the CEO are approved by the Board, which at least looks for an acknowledgement before passing approval. The ED, the head of the Board of Directors, plans to make a variety of policies and hold meetings with the shareholders and bondholders to explain any huge changes in the company.
  • As aforementioned, the CEO is the highest-ranking executive of private and non-private, corporate and non-corporate, profit-making companies, and so on. The ED, as well as the higher-ranked executive of all the mentioned firms, the CEO, also plays an executive role in a non-profit firm, the NPO.
  • The salary of an ED is far lesser compared to that of a CEO. The executive director of a very small NPO may even have no earnings; the executive director performs only voluntary work, whereas, in a profit-making company, the executive director earns nearly 6 to 7 digits annually. While the CEO earns significantly more than the ED, i.e., nearly $7 to $8, and possibly even $9 shortly.

Conclusion

Understanding all the functions and performance of both the roles of CEO and ED simplifies which work is conducted by which authority. Despite all theories, reality differs in that the work rules of any private company are written and authorised by them. The board's regulatory actions are taken into consideration while doing so, and any necessary measurable changes are made by the company. Some companies even hire the former CEO as an executive director to expedite the transition of a newly appointed CEO.

To summarize, as the highest-ranking executive, both have distinct roles in expanding market reach and implementing successful changes in the workplace. 

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"Difference Between CEO and Executive Director." Diffzy.com, 2024. Sun. 16 Jun. 2024. <https://www.diffzy.com/article/difference-between-ceo-and-executive-director-1134>.



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