The relationship between the CEO and the board of directors

The CEO of a company, or the CEO, is the organization’s public face. Still, he represents not only his own decisions as an individual but also those of the entire board of directors. The board of directors acts behind the scenes and does not have as much public visibility, and therefore all of the company’s successes or failures will always fall to the CEO. These two links must work in synergy and treat each other with respect. This is the only way they can achieve success in running the company. This article will look at the relationship between the CEO and the board of directors.

What are the responsibilities of the CEO?

The CEO is the highest ranking person in the company; he is the one who has the final say in any given decision. He decides organizational issues as well as determines the strategic direction of the company, which may include:

  • Improving work processes
  • Resource management
  • Corporate culture

It is often the case that the board of directors and shareholders elects the person for the CEO position. The CEO’s involvement in the company’s day-to-day affairs depends on its size. If it is a small business, the CEO also manages the daily processes, but in large organizations, they make decisions only at a high level. If a company becomes known in the world market, like Apple or Tesla, the CEO of such an organization also becomes famous because we all know who Steve Jobs and Elon Musk are.

What does the board of directors do?

The board of directors is the superior body of any company, elected by shareholders to protect their interests. The main purpose of the board of directors is to conduct a good corporate policy of oversight and governance. The board of directors is never involved in the internal affairs of the company, but their responsibilities include:

  • Deciding on dividend and stock option policies
  • Executive compensation
  • Electing or firing superior officers, such as other board members or the CEO

The board usually consists of company insiders familiar with the organization’s business policies and workflow structure and qualified professionals from related fields who the company does not employ. The board’s governance is outlined in the company’s articles of association, which detail the board’s structure, the number of members, the frequency of meetings, and how meetings are conducted. The board must balance the interests of the company and its shareholders, and maintaining a good relationship with the CEO is an important part of their job.

What should be the relationship between the CEO and the board?

In terms of “how it should be,” the ideal relationship between the CEO and the board would be one in which the CEO and the board collaborate to advance the company’s interests. For example, the board sets goals for the company’s further development, and the CEO builds and manages the executive team to pursue those goals. Also, the board can advise the CEO, and their opinions don’t always have to agree, except that it should not diminish your job performance but only strengthen the company’s position in the marketplace. Some of the CEO’s responsibilities concerning board relations include:

  • Set expectations in terms of the relationship with the board, counting on the board to be a supportive force for the CEO
  • Assuming transparency in the relationship increases trust and level of cooperation
  • Establishing clear channels of communication that will increase engagement and reduce the likelihood of ambiguity