Chief executive officer

Not all corporations have a chief executive officer (CEO) but if they do, the CEO is the highest-ranking employee in the organisation. They’re sometimes called a general manager or an executive manager.

Directors can hire a CEO to manage day-to-day operations. The board remains responsible for the corporation’s performance. 

Learn more about the role of management and CEO compared to the board in this discussion from experts. 

Hiring a CEO

The board is responsible for hiring a CEO. When they do this, the directors delegate responsibility for:

• leading and implementing strategy
• managing and running the corporation's operations. 

What the CEO is responsible for should be made clear in a position description or duty statement. 

The board keeps the CEO accountable to their delegated duties. 

When the board appoints a CEO they should give them:

• a letter of appointment saying the terms and conditions of their employment 
• a copy of their position description.

If you decide to employ a CEO, make sure you know your responsibilities under workplace relations laws. 

For more information visit the Fair Work Ombudsman website.

CEO duties

Under the CATSI Act, the CEO is an officer of the corporation. That means they’re someone who:

• is involved in making decisions that affect the business of the corporation
• can greatly affect the corporation’s financial standing.

Being an officer means a CEO has some legal duties:

• a duty of care and diligence – for example, prepare reports so the directors are well informed to make decisions in the best interests of the corporation
• a duty of good faith – make decisions in the best interests of the corporation and never for their personal gain
• a duty to not improperly use position or information – not use their position or information they get to benefit themselves or someone else, or to cause harm to the corporation.

Find out more about officers and their legal duties.

A CEO can be a director but cannot chair a directors’ meeting. 

If someone is both a CEO and director, they’ll probably face lots of conflicts of interest. They’ll need to manage their responsibilities to govern and manage very carefully. 

CEO and director relationship

The directors and CEO have very different roles and responsibilities, and they should stay separate. The board’s role is to:

• hire the CEO and induct them into the culture of the corporation and the communities it represents
• share the vision and support the CEO to turn it into action
• regularly assess (and note) the CEO’s performance.  

The CEO’s role is to:

• act on the directors’ vision and report on the corporation’s progress
• be the champion for the vision among staff, funding bodies and other stakeholders
• convert the vision into a step-by-step plan and secure staff and resources to carry it out
• track progress, income and expenditure and give regular reports to all the directors.

Corporations have a better chance of success when the board and CEO:

• work well together
• share an understanding of the corporation's mission and values
• trust one another. 

Hear about some of the common mistakes CEOs can make in this discussion. 

The directors must stay well-informed so they can make strategic decisions. That means the need to keep an eye on their CEO's work. But the CEO needs to be trusted to make operational decisions.

Reviewing CEO performance

Good governance includes having clear lines of accountability. You also need a process for tracking and managing them.

To check in on the CEO’s performance, have a mix of:

• informal, two-way feedback 
• a formal evaluation process, usually 6-monthly or yearly.

This will allow you to see how they’re going against their role set out in their position description and duty statement.

A performance review might also relate to job milestones, like the end of a probation period.

An effective review doesn’t just check a list. It’s a time for the board and CEO to strengthen their working relationship by:

• raising issues with how each other operates
• clarifying expectations and strategic direction
• identifying areas of development or signs of possible problems. 

Planning for future CEOs

The process of identifying and developing people to fill a future vacancy is called ‘succession planning’. You should always have a plan to fill the position if it becomes available with or without notice.

At least once a year, review what skills, capabilities and personality your CEO should have to manage the corporation into the future. To do this, consider the corporation's:

• current and long-term strategic direction
• risks and opportunities, for example, economic development or proposed changes in government policy
• internal corporate culture
• current level of maturity, including growth, maintenance and strength.

Comparing the results of this review to the CEO's performance can show if that person is still the right fit into the corporation’s next phase. 

The results can also help you find others with the skills and capabilities to take on the role if the current CEO leaves.