tech-company, founder, co-founder, ceo, boardTwo co-founders with equally important roles, and equal involvement in leadership are starting to incorporate and sign contracts, which means they have to pick who earns the coveted title of CEO. How is this decision made?
In this particular case, the two co-founders have very dominant personalities, and a large part of the success of the startup up until this point was due to a deeply held belief in the equality of the two founders. How would the CEO be chosen, and what are some differences between traits of CEOs vs. CFOs, CTOs, COOs, Chairmen of the Board and other alternative positions for the other?
The CEO of a company (often called the Managing Director in some parts of the world) is generally associated with a specific area of responsibility. Some people uninformed with corporate structure assume the CEO is “the boss,” but that’s often not true. The ultimate head of a corporation is/are the shareholder(s) and their board of directors.
According to Investopedia:
A Chief Executive Officer (CEO) is the highest ranking executive in a company whose main responsibilities include developing and implementing high-level strategies, making major corporate decisions, managing the overall operations and resources of a company, and acting as the main point of communication between the board of directors and the corporate operations.
The CEO is the head of the corporate-side (or “business-management-side”) of a company. What that means exactly depends on what responsibilities the board of directors decide to give the CEO. The reality is the board of directors has the right to give or limit the roles and responsibilities of any member of the corporate C-Suite, any President or anyone else in the company.
Depending on a company’s business, other executives might be more powerful than the CEO. In technology, the title of CTO (Chief Technology Officer) may be more important than CEO because the CTO may be responsible for more important decisions within the company. In fact, it’s quite common for technology-oriented owner-founders to choose to hire a CEO because they prefer to focus on the technology rather than becoming business managers.
Business managers often deal with human resources, communicating with the public, building a corporate culture, and a lot of what I call “touchy-feely stuff” that might not be of interest to someone who just wants to build great products or someone whose skills are not particularly good in such areas.
A great example of company founders hiring a CEO is when Google founders Larry Page and Sergey Brin hired Eric Schmidt to be their CEO in 2001. Schmidt had a lot of experience running the business-side of large technology companies which made him a great fit at Google, Inc. Larry Page (who was then CEO of the still-young startup) assumed the role of President of Products. This was a better fit for Page as he is a technology guy who is better at being the head of the developers building Google’s technological products than spending all his time dealing with the intricacies of corporate management. Regardless, as major shareholders, Page and Brin remained the ultimate authority because of their influence on the company’s board – the true head of the company.
The bottom line is, the CEO is not necessarily “the boss,” but a specific role with specific responsibilities. The title should not be coveted as it would be amateurish to do so. The true role to covet is the one that allows you to do anything you want within a company while maintaining ultimate control. Only the Principal Shareholder(s) can do this.
As for how the CEO position relates to other positions in a company – again, that is up to the company (the board of directors) to decide. There are no hard rules here. If you’re a plumbing company, you can invent the title Chief Plumbing Officer and make that person in charge of all the important parts of the business while the CEO manages the coffee maker. It’s up to you.
All that being said, it sounds like we’re talking about a small company in which there isn’t much of a corporate structure to manage. Let’s say one of the founders is a technology guy and the other is an accounting guy. If both make the business decisions together you might name one Co-CEO and Chief Technology Officer and the other Co-CEO and Chief Financial Officer. And if the founders can’t set their egos aside to accept “Co-CEO”, then just drop the “Co-“ prefix and print “CEO” on each of their business cards. This is all silly and doesn’t really matter. What matters are the responsibilities set by the board of directors. And that part is different from company to company.
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