A chief executive officer (CEO) or managing director (MD) in a corporate organization is a member of the board of directors of a corporation, partnership, or another similarly organized enterprise who has been given by the board of directors to which the board has been given decision-making powers over shares and structure of the company’s activity, and which plays a predominance role within it.
General characteristics of CEO
In the legal systems which, on the German model, adopt the two-tier system of corporate governance, dividing the board of directors into two collegiate bodies, the supervisory board and the management board, the role of head of the company is played collectively by the latter which has its own chairman (Vorstandsvorsitzender in Germany) other than the chairman of the supervisory board.
In the world
The title attributed to the head of the company varies according to national traditions: the title of managing director is used, for example, in Italy, Switzerland (but only if the person in question is also a member of the board of directors), Portugal and Belgium but is also commonly used to translate into Italian the different names used in other countries.
In many countries, where the French model is widespread, the title of general manager is used (for example, the director general in Spanish-speaking countries) which, on the other hand, in Italy usually designates a manager subordinate to the CEO. In Switzerland, on the other hand, the simple title of director is used, but only if the person holding this position is a third party who is not a member of the board of directors. Also, in France and other French-speaking countries, it is often called président-directeur général (PDG) as it also holds the role of chairman of the board of directors (in Québec, however, the title of chef de la direction is also used). In Sweden it is called verkställande direktör (VD), in Norway and Denmark administrerende direktør (adm. dir.).
CEO in Japan
It usually has the title shachō (社長), which translates as president. There may also be a kaichō (会長), which can be translated as chairman of the board of directors: traditionally a retired shachō, sometimes the founder of the company, who can maintain considerable influence, even without formal powers. The shachō and other senior managers, sometimes also the kaichō, are daihyō torishimariyaku (代表取締役), members of the board of directors to whom he has delegated powers.
Especially in smaller companies, the head of the company can also be chairman of the board of directors ( so-called CEO duality), although the separation between the two positions is considered good practice. In U.S. companies, the CEO may have the office of president of the company, distinct from that of chairman of the board of directors; in some companies, especially large ones, the position of chairman of the company is, instead, attributed to a manager directly subordinate to the CEO, the chief operating officer (COO), a figure similar to the general manager of Italian companies.
In Italy the title is usually attributed to the member of the board of directors placed at the head of the company organization, the so-called company manager; Sometimes a distinction is made between the managing director and the managing director, a member of the board with a limited delegation, for example to a specific company function. The CEO should not be confused with the chairman (of the Board of Directors) who, when the figure of the CEO exists, has a political function or representation and guarantee towards the shareholders’ / shareholders’ meeting.
The figure of the CEO of joint-stock companies is governed by art. 2381 of the Civil Code contained in Book V, Title V, Chapter V, Section VI bis. According to that article, if the articles of association or the general meeting so permit, the board of directors may delegate its powers to an executive committee, composed of some of its members, or to one or more of its members, the managing directors (delegated bodies).
In this case, the board determines the content, limits and possible methods of exercising the delegation; It can always issue directives to the delegated bodies and take over operations falling within the delegation. On the basis of the information received, it assesses the adequacy of the organizational, administrative and accounting structure of the company; examines the company’s strategic, industrial and financial plans, if prepared; assesses, on the basis of the report of the delegated bodies, the general performance of operations. However, administrators are required to act in an informed manner; Each director may ask the delegated bodies to provide the Board with information relating to the management of the company.
The delegated bodies shall ensure that the organizational, administrative and accounting structure is appropriate to the nature and size of the company and shall report to the Board of Directors and the Board of Statutory Auditors, at the intervals established by the Articles of Association and in any case at least every six months, on the general performance of operations and its foreseeable evolution as well as on the most significant transactions, for their size or characteristics, carried out by the company and its subsidiaries.
The following may not be delegated:
If the company’s articles of association have adopted the two-tier system, the management of the company is the sole responsibility of the management board, which may, however, delegate its powers to one or more of its members according to the same rules now seen (Article 2409-novies of the Italian Civil Code).
Managing Director and General Manager (if this figure exists) are two very different roles: General Manager is the head of the other directors and/or managers, has managerial but operational tasks and is subordinate to the CEO. The DG is a manager, i.e. an employee of the company of which he is the general manager, unlike the CEO who, by definition, is a director and answers only to shareholders/shareholders.
The title of Managing Director (MD) is generally used in Great Britain by public limited companies (public limited companies whose shares are offered to the public) as well as by non-profit organizations and public agencies. The Ferguson v Wilson case of 1866 was the first of a consolidated jurisprudential orientation, which stated that every company as holder of legal personality, is obliged to have a legal representative (director), actively and passively entitled to take legal action in its name and on behalf of it. Only to these, shareholders can ask to be represented in court. Section 154 of the Companies Act 2006 requires any private company to have at least one representative and any public company to have at least two.
The Hutton v West Cork Railway Co case of 1883 established the obligation to place limits on the spending power of directors vis-à-vis persons other than shareholders. The Companies Act 2006 affirmed the primacy of shareholders under the principle of Enlightened Shareholder Value, whereby directors are the first point of reference for unitholders and are required to act in their primary interest. At the same time, the rule introduced the provision of a right and duty of the management team to take into account in its management also the bearers of rights and legitimate interests other than the owners of the property, such as employees during bankruptcy proceedings. Section 172 of the Companies Act 2006 states that:
«A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole».
– 2006 Companies Act, UK, section 171
The text goes on to state that directors must weigh the impact of any decision in the long term, the interest of workers, the impact of operations on the environment and local communities, the need to establish lasting relationships with customers and suppliers, the opportunity for business to preserve a public reputation in accordance with high ethical standards and the need for proper conduct at the ‘within the members of the company.
CEO in the United States of America
In the USA he is called chief executive officer (CEO), a term that has now spread internationally in economic and journalistic language, while in other Anglo-Saxon countries, the title of managing director (MD) is usually used.
As an indication, in 2000 the average per capita compensation was 11.3 million dollars, of which 60% derived from stock options, 18% from annual bonuses, 11% from preferred shares, 9% from salary.