At the top of many large businesses operating around the world today, you will find two offices. You have the office of the executive chairman and the office of the CEO. In some companies, especially smaller ones, the same person may fill this role. In most cases, however, these positions are held by separate people.
The terminology that is used to define these two positions is what leads to some confusion. In some companies, the executive chairman is also referred to as the “chief executive.” That is still a different role than the “chief executive officer.”
Both roles are typically defined in the bylaws of the company. For general purposes, the executive chairman would review financial reports, be involved with the public image of the company, and look for ways to improve the organize in some way.
The CEO would be directly involved in the daily operations of the company as its highest-ranking officer. This role is also strategic and involved elements that the executive chairman would take on, while also serving in a leadership position for the rest of the C-Suite, overseeing the leadership team as direct reports.
Here is a closer look at each role and how it is applied within the typical business.
What is the Role of the Executive Chairman?
There are two ways to be an executive chairman in a modern company. The first is to be the most senior chairman on a Board of Directors. In this role, the individual would serve as the head of the Board. They would be elected on the same cycle as every other chairman, functioning like an executive, but more in an advisory role.
What makes this position unique is that the executive chairman is symbiotic with the chief executive officer. The Board of Directors will oversee the activities of the CEO, which means they serve as a check or balance over the C-Suite of the company. At the same time, the CEO controls the direction of the company, makes decisions that affect the company’s future, and may simply report on those activities to board members.
The executive chairman is tasked with presiding over meetings of the Board of Directors. If this role is obtained through seniority, there may not be any executive authority assigned to the position. If elected or assigned the position, the executive authority of this office would be equal to, if not higher, than that of the chief executive officer.
The executive chairman influences the company in an advisory role without taking on most day-to-day operational responsibilities. Some people in this role may prefer more influence in the company, which would shape the office to be closer to that of a CEO. Others may take more of a hands-off approach, which would make the role be closer to that of a standard chairman instead.
What is the Role of the Chief Executive Officer?
The CEO is usually considered to be the highest-ranking officer in a company. They oversee the C-Suite, are involved in the daily operations of the company, and may serve on the Board of Directors. It is possible for a person to serve as the CEO and Executive Chairman at the same time within a corporate structure.
Although a CEO and a President are sometimes seen as being equals or counterparts in a company, the CEO is usually ranked first, then the President is ranked second in terms of authority. There can be several different permutations in corporate structure, however, so the role of the CEO can look very different when comparing companies.
The chief executive officer is charged with the creation of all high-level strategies. These plans then filter down through the chain of command to create plans that can be implemented on each level. The CEO relies on lower-level managers to oversee quality issues, metrics, and other performance needs in the implementation of strategy. They are concerned more with making the strategic decisions that make an organization stand out when compared to the competition.
At the same time, the CEO will also serve as a bridge between the rest of the company and the Board of Directors. Many will seek the advice of their Board to determine new strategies, visions, or missions for the organization to pursue.
The one key difference between these two executives is that if the Executive Chairman becomes dissatisfied with the CEO’s performance, the Board of Directors can be lobbied to remove the CEO. In many circumstances, the Executive Chairman is elected or appointed to the role and serves out a specific term, so they cannot be removed unless there are specific conditions met first.
Executive Chairman vs CEO Salary
Depending upon the structure of the company, an executive chairman may be in a volunteer position. In that circumstance, they would not draw a salary at all.
Glassdoor reports 24 people who have reported their salary in the role of an executive chairman, with the average of all reports being $36,000 per year. The highest reported salary to the site was $57,000.
Comparably lists the average salary for an executive chairman as $733,000 in the United States, with a base salary of $443,000. They note that compensation packages in San Francisco and New York City tend to be 12% to 15% higher than the U.S. average.
One issue that affects the average reported salaries for executive chairman roles in the United States is that many people draw a salary of just $1 – if they choose to draw one at all.
PayScale averaged the salaries of 2,139 CEO positions that were reported and determined that the average chief executive officer in the United States earns about $193,000. This is based on the CEO having between 10 to 20 years of experience in the industry where they were running the business.
According to Salary.com, the average CEO salary is much higher, at $758,000 per year, with a top average range close to $1 million.
Most CEOs earn six figures, even if they are working for a small company. USA Today reports that of the 100 largest companies in the United States, Dirk Van de Put of Mondelez International earns the most, with a total compensation package of $42.4 million.
How a CEO and an Executive Chairman Divvy Responsibilities
An executive chairman and a CEO must complement one another to create a relationship that is both symbiotic and additive. There is no right or wrong way to split up their responsibilities from a generalized standpoint. Each person should focus on their strengths, with a clear line of division separating the two roles.
At the same time, there must be some overlap which occurs, because these two high-level positions must be able to collaborate when the time is right.
Although every situation is different, there is a basic outline which should be followed when creating separation between the executive chairman and the chief executive officer within an organization.
1. The owner of the company, if present, should delegate their authority to the Board of Directors.
2. The chairpeople, lead director, or President of the Board should be placed in charge of the board.
3. The executive chairman is treated as an employee of the company, where they support the CEO and provide guidance. If this office is granted, they would be placed in charge of the board instead.
4. The C-Suite, which includes the CFO, COO, CIO, CHRO, and other chief executives provide support to the chief executive officer using their specialized expertise to fulfill the daily organizational and strategic tasks which must be completed.
5. Each role can work together, depending upon their comfort level, to push the company forward toward their ultimate vision, mission, or goal.
Key Difference Between the Executive Chairman and the CEO
In most companies, the executive chairman is the public figure for the organization. They work with the other executives in the company to provide leadership training. They review compliance issues with federal and state laws, ensure ethical business practices are in place, and that all parties are adhering to the mission statement of the company.
The CEO would perform these actions as well. Many CEOs are the public face of the company, especially as the digital age as evolved since 2000. The difference here is that the CEO ultimately reports to the executive chairman, not the other way around, so from a technical standpoint, it is the executive chairman who runs the company.
That is why many owners who wish to stay involved in their company will take on the role of an executive chairman instead of being a CEO.
Because there are so many similarities with these two positions, the lines between an executive chairman and a chief executive officer can be quite blurred. Both have authority over the company. How they are able to wield that authority is very different. When both roles work together and have a positive relationship, great things can happen.
Crystal Lombardo has been a staff writer for Future of Working for five years. She is a proud veteran and mother. If you have any questions about the content of this blog post, then please send our editor-in-chief a message here.