Just because you are the founder of the business does not mean that you are a Chief Executive Officer (CEO).
Before pulling out the pitch forks, let me explain.
The role of CEO is to execute the goals and objectives of the shareholders, be the direct line of communication with the board of directors, be accountable to the board of directors, develop and implement strategies, and oversee the operations of the company. A large part of the description and responsibilities are tied directly to relations with the Board of Directors.
If you’re raising your eyes in skepticism right now, this is how the Business Dictionary defines the CEO:
Top executive responsible for a firm’s overall operations and performance. He or she is the leader of the firm, serves as the main link between the board of directors (the board) and the firm’s various parts or levels, and is held solely responsible for the firm’s success or failure. One of the major duties of a CEO is to maintain and implement corporate policy, as established by the board. Also called President or managing director, he or she may also be the chairman (or chairperson) of the board.
Investopedia also highlights one of the “main responsibilities” as “acting as the main point of communication between the Board of Directors.
Needless to say, the presence of a Board of Directors is extremely relevant to the title of CEO.
Far too many small business owners classify themselves as a CEO in absence of a board. In short, they call their business a corporation, but once you pull back the curtain it’s really run as a sole proprietorship. I call these types of businesses CINO, or Corporation In Name Only. The business is an extension of the business owner. The management style mimics a wagon wheel where all decisions lead directly back to the owner. Every single decision needs to be run past the owner, with no team members having the authority to execute without the approval from the center of the wagon wheel.
Technically, the majority of these CINOs have the legal classification of corporation. In some cases, it’s primarily done to award the title of CEO. Others claim the title regardless of the legal classification. Some business owners don’t realize the difference between the title founder and CEO thinking they are interchangeable. Others see the title as an ego trip.
Regardless of the origin of the practice, I want to once and for all call out this misguided and somewhat insulting practice. Solely because you own or founded a company does not make you a CEO.
The role of Chief Executive Officer far extends the parameters of a sole proprietorship masking as a corporation. First, a true description of a corporation is that it is its own entity. It has a SNN called an FEIN number. It pays its own taxes. It has its own set of corporate laws. In sharp contrast, a sole proprietorship often serves as a funnel to run personal or lifestyle expenses through the financials to avoid taxes. But I digress.
The real CEO assists in the execution of a long-term strategic plan for the company. When decisions are made, they are evaluated based on the best interests of the business. In order to grow and succeed, it needs cash reserves. The moral compass is determined by the people who make up the company. Like an individual, the company needs a supportive infrastructure to develop.
A corporation far exceeds the needs, desires, or, quite frankly, the capacity of the initial founder. This is why the corporation awards the title of CEO to the individual who helps it navigate the upcoming challenges it will face as it matures.
If the role of CEO is your true goal, then start working to foster leadership within the company and building systems to allow others authority to make and implement decisions. Make decisions based on the best interest of the company, not your personal tax bill. Build reserves in the company to account for times that are thin.
Remember, the CEO gets paid last, not first. They eat last, not first. They offer mentorship, coaching, inspiration, and vision as opposed to controlling and limiting systems. Build this philosophy into every aspect of the business to grow toward the true spirit of the corporation designation.
If you want to put your business on a trajectory to scale to the level of a real corporation with strategic plans, a Board of Directors and the ability to grow beyond yourself, contact me today. Together, we can put your business on that path.
Should the role of CEO with direct ties to the board and shareholders not be your particular goal, then enjoy and celebrate the business you have built. Just call yourself a business owner or founder. If titles really matter, call yourself a King. But leave the title CEO to those who earn the title.