CEO Definition and Meaning

CEO Definition and Meaning

According to abbreviationfinder, the term “Chief Executive Officer” (CEO) comes from the USA and describes the highest decision-maker in a company. Depending on the legal form of the company, a CEO is understood to mean the executive board member, the chairman of the board or, in smaller companies, the managing director who is the sole authorized signatory.

In Germany, however, the term CEO has no legal meaning! Therefore, employment contracts that describe the area of ​​responsibility with the term CEO are legally incomplete. So if the term CEO appears in your employment contract, insist that it be replaced by a clear and legally relevant term under German labor and company law.

Language of globalization

The term has been appearing more and more frequently in German companies since the 1980s. This was the time when US companies increasingly started establishing German branches or acquiring German companies. Initially only within the company, the parent companies insisted on using the functional designations customary at home in addition to the Anglo-Saxon company culture.

Market ahoy!
The term “officer” in the private sector, which sounds so military to non-Anglo-Saxon ears, has its roots in the 16th and 17th centuries, when what is understood today to be the first companies in Great Britain, the sea trading companies, came into being. In operational business – ie on the ships – these used the tried and tested, strictly hierarchical, military structure, since this had proven to be the most efficient in dangerous situations at sea. With the branches of these sea trading companies on the newly discovered continent of America, the tradition of the maritime management structure also gained a foothold there, because for a long time these branches were often the only companies in the colonies worthy of the name.

Gradually, however, more and more internationally active German companies began to use these Anglo-Saxon terms in-house, but also in external communication. On the one hand, this facilitated contact with international and US business partners and, on the other hand, it emphasized the company’s international character and career potential on the job market.

position in the company structure

In order to be able to assess the function and powers of a “real” CEO, i.e. the CEO of a US company, we must first deal briefly with the hierarchy of a US company and its so-called board of directors (short: board). The board of a US company is usually a mix of executive and supervisory boards (a so-called monistic hierarchy – see below for dualistic companies). The chairperson is referred to as the Chairman of the Board (COB), and its members as the Chief Officer (CxO). The X in the abbreviation stands for another letter, which designates the exact responsibility.

Corporate titles are common here

  • Chief Executive Officer (CEO: Managing Director),
  • Chief Financial Officer (CFO) and
  • Chief Operating Officer (COO: member of the board responsible for operations).

Since there are numerous other – often industry-specific – C-function designations whose responsibilities can be deduced relatively easily from the designations, it is sufficient to remember that chief officers generally belong to the highest decision-making level of a company (either the board of directors or the executive board). Job titles that begin with “Chief” but do not contain “Officer” hierarchically denote the level of department heads.

Management in variants

In principle, these C function terms are not only used in connection with public companies in the USA, but also for family and medium-sized companies. Then the CO level corresponds to the management.

Incidentally, even in the economy of the Anglo-Saxon world, the term CEO is not always used equally. While a CEO in a US company basically heads the company and his CO colleagues, i.e. determines the company’s strategy, in Canada he is only an equal member of the board of directors or management.

Yet another variant are US companies that are organized in two ways, i.e. have an executive functional level (executive board) and a controlling functional level (board of directors). This structure is similar to the hierarchical structure of German stock corporations with a board of directors and a supervisory board. In these cases, the CEO and COB are personally separate from each other. In such a dualistic structure, the function of the COB comes closest to that of the German chairman of the supervisory board.

Conclusion: Clarify area of ​​responsibility

Before negotiating with a CEO, find out if there is a COB in their company alongside the CEO. In this case, you can assume that fundamental decisions that are relevant beyond day-to-day business still have to be approved by the COB. This applies above all to ethical, religious, political and homeland security aspects.

Finally, an anecdote should round off this excursion into the Anglo-Saxon world of top management: There is a well-founded rumor that Facebook founder Mark Zuckerberg had “I’m CEO, Bitch!” printed on his first business card.

CEO Definition and Meaning

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