What Is a CEO? Definition and Requirements
By Indeed Editorial Team
Updated 13 December 2022
Published 22 July 2021
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Almost every company has a chief executive officer to help make business decisions that can increase profit and grow the business. The CEO's responsibility can vary depending on the company, but they represent the employees, the company's values and the shareholders. Understanding what a CEO is and how a person can become one is crucial in knowing if you can consider this career path. In this article, we discuss what is a CEO and requirements to becoming a CEO.
What is a CEO?
A chief executive officer, or CEO, is the top-ranking employee in a company. They make sure the organisation operates efficiently and meets its financial goals. Reporting to a company's board of directors, they receive input and advice from other executives and shareholders, but they take ownership of most of a company's major financial and operational decisions. They might also oversee the budget, workplace culture, staffing, human resources, team-building and more. Other responsibilities include:
Communicating to shareholders, media, the government and the public on behalf of the company
Overseeing the management of each department
Creating and implementing the companies vision
Meeting regularly with board members and other company leaders
Negotiating acquisitions and other partnerships and contracts
Hiring leadership teams
Determining performance metrics and measuring progress towards goals
Researching industry standards and competitor's strategies and practices
Attending conferences and other events
Developing short- and long-term strategies for the company
In smaller companies, a CEO might oversee daily activities and management of every department, while CEOs of large organisations typically delegate those tasks and focus on strategy, planning and financial success.
Differences between the chairperson of the board and a CEO
A company's board of directors is a group of executives and shareholders that help the CEO with company oversight. The Chairperson of the Board leads this group, but rather than as an owner of business operations and oversight, their primary responsibility is to protect shareholder interest. Although the CEO and the Chairperson work together to ensure a business runs smoothly, there are some key differences to distinguish the two. Here are some of the main differences:
Conflict of interest
A conflict of interest is when a person involved in decision-making can choose one option that can negatively affect other areas of business. If there are decisions that can affect the CEO and other internal employees, the board may consider them conflicts of interest. For example, the Chairperson may conduct the CEO's performance reviews and decide on salary increases to avoid conflicts of interest.
The CEO proposes the decisions including mergers, sale of assets, resource allocation and market strategies to the board of directors. The Chairperson of the Board represents investors' interest, so they analyse financial data and the CEO's proposals for any potential adjustments. However, the group typically votes on big decisions. The CEO and the board both have similar goals to ensure happiness and trust in their investors, but the CEO has other considerations within the organisation.
The CEO technically reports into the board and the chairperson, as they hold the CEO accountable for the business's success. In some countries, the CEO can serve as the Chairman, but the two working together, along with the other board executives, provide for a more democratic governing process over a company. Some countries even ban the CEO from being the Chairperson to avoid issues like conflict of interest.
To become a CEO there are a few different paths you can take. Most CEOs have a minimum of a bachelor's degree, a specific skill set, certification training and extensive work experience. Here are some aspects a person can work on to become a CEO:
Most CEOs have at least a bachelor's degree. Some people recommend attending universities in Japan or the United States to learn about international business practices. Depending on your interest, you can pursue a degree in economics, finance, accounting, business, information technology, political science or similar subjects that can help CEOs develop their leadership and decision-making skills. Most industries and companies need CEOs, so you can pursue an education in a subject that interests you.
While getting their bachelor's degrees, future CEOs can take classes in subjects such as finance, operations, ethics and public policy to build their foundation for a career in management. Having a basic knowledge of business, finance and operations is key in your journey towards becoming a CEO. Many people pursuing this career earn a master's degree in a field such as business administration, finance, law or public administration. An MBA, in particular, includes courses specific to running a company, such as human resources, accounting, organisational behaviour and corporate strategies.
CEOs receive most of their training through their work experience. For example, if a person starts as a sales associate, they may receive a promotion to a sales manager, regional manager, director and executive director. At each of these roles, the candidate learns key information about the business, such as how to lead teams and develop strategies that can bring the organisation success. People in other departments, such as marketing, advertising, editorial or content groups, can also follow a similar career development trajectory towards this role.
Related: 10 Types of Leadership Styles
While CEOs do not need certification to get hired, these credentials can provide them with more job and earning opportunities. Some industries prefer CEOs to have industry-specific certifications. The CEO of a financial group, for instance, might be a certified public accountant. Other certifications that can benefit CEOs include:
Certified Management through the Institute of Certified Professional Managers: This certification is a US-based but globally recognised accreditation that requires completing 90 education hours and passing an exam.
Certified CEO through the International Institute of Directors and Managers: Existing CEOs might consider this to become certified by this internationally recognised organisation. Mid-tier managers and less experienced CEOs can also earn accreditation in their roles through this institute.
Certified CEO through the CEO Institute: This credential is U.S.-based and can take 12 months to complete. You can apply some course credits to earning an MBA.
Chief Executive certification through the Business Value-Oriented Principles Institute: CEOs study the required people and project management coursework and pass an online exam.
These certifications all require a certain level of education and number of years of work experience to be eligible, but they may boost your chances of securing a position as CEO when you've gone through them.
CEOs have a lot of different responsibilities and may work in various industries. This means each CEO has a unique set of skills. Still, as the head of a company, here are a common list of skills that most CEOs have:
Communication: CEOs represent the company to customers and shareholders and ensure their employees understand the company's goals and values. Using verbal and written communication skills, they discuss decisions, explain policies, negotiate and give presentations.
Decision-making: CEOs analyse data and trends that can determine the future success of their business. As an organisation's top-ranking official, they decide, often quickly, on which direction the company takes and how they can move forward.
Leadership: Good leadership means motivating teams, ensuring employees have the drive, information and resources they use to do their job and showing enthusiasm themselves. The CEO might direct and manage policies, operations, budgets and staff to achieve success.
Time management: Due to CEOs having numerous responsibilities, time-management skills are necessary. They'll balance meetings, reading and analysing information, travelling and making decisions.
Listening: One way a CEO can make informed decisions for their company is to ensure they are actively listening to others. This means asking clarifying questions, showing employees and shareholders that they care, and truly understanding the needs of the business.
CEO work environment
Almost every type of company in each industry requires a CEO to help the business operate smoothly. Depending on the size of the organisation, executives can manage a few employees at a small company to thousands of employees at an enterprise corporation. They typically work in an office environment, dividing their time between sitting at a desk and meeting with other managers and executives. They might also travel frequently to meetings and conferences. CEOs might work long hours, including evenings and weekends, depending on their current goals and deadlines.
If you're interested in a career as a CEO, you can also learn about similar careers, such as:
Please note that none of the companies mentioned in this article are affiliated with Indeed.
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