Who’s in charge of a company?
As an investor, it’s useful to understand who’s in charge of running a company. After all, the company succeeds or fails based on their decisions.
With that in mind, let’s look at some of the key people in a listed company, and what they’re responsible for.
The board of directors
The board of directors is at the very top of a listed company. They’re a group of people who are in charge of the big-picture decisions. They work with the management to figure out what the next two, five, and even 10 years look like for the company. Then they set a strategy to help the company get there.
If a company decides to start, or stop, selling their products in a certain market, or decides to start making a different kind of product entirely, that is usually a big-picture decision that comes from the board.
A board of directors is usually made up of two kinds of people:
executive directors, who are also employed by the company as managers, and
independent directors, who do not work for the company.
This gives a mix of knowledge and experience—helping to bring diversity of thought and opinion to the table.
The board of directors doesn’t just do whatever it wants, though. They’re directly accountable to shareholders. Companies have shareholder votes confirming new board members, continuing board members’ contracts, and setting their pay. If the shareholders aren’t happy with the board, they can vote the directors out and get a new one.
So the board sets the overall strategy, but someone has to make it happen! This is where the executive management comes in—otherwise known as the chiefs.
The board and the chiefs aren’t mutually exclusive—it’s not uncommon for some of the chiefs to be on the board as executive directors.
Different companies will have different kinds of chiefs, but almost every company will have a chief executive officer (CEO) and a chief financial officer (CFO).
Chief executive officer (CEO)
The CEO is in charge of the whole company—they’re essentially the boss. They decide how the company will implement the strategy set by the board.
For example, if the board has decided that the company is going to set up an office in a new region, the CEO is in charge of making sure that happens—or hiring people to make sure it happens. But the ultimate responsibility is with the CEO.
Chief financial officer (CFO)
The CFO is a bit more specialised. They’re in charge of the finances (just like the job title suggests).
Where a CEO decides how the company will deliver on the strategy the board sets, the CFO figures out how they’re going to pay for it.
A chief for every chiefdom
There are also lots of other chiefs, depending on the size and structure of the company. For example:
chief operating officer (COO)—they’re in charge of making sure things run smoothly day-to-day
chief marketing officer (CMO)—they’re in charge of all things marketing
chief people officer (CPO)—they’re in charge of looking after people and other employment stuff
chief technology officer (CTO)—they’re in charge of all the IT
chief information officer (CIO)—they’re in charge of technology that the listed company sells to people
… and lots more. Also, every company structures their chiefs’ roles a bit differently, depending on how they run things. But these give the broad strokes of what various chiefs might be in charge of.
External auditors don’t actually work directly for the listed company, but they’re still a critical part of the company.
Auditors are a third party who come in on a regular basis to check the information in the company’s annual report. This is something that every public company has to do, and while it isn’t a guarantee that everything is correct, it’s a useful second set of eyes.
That’s why the auditors are always third parties—it’s really important that they’re independent.
Why this matters
The people in charge of a company play a huge role in its direction. They make decisions about where to invest the company’s money, what kind of things to sell, what price to sell things at, and every other meaningful decision that ultimately leads to the company’s success or failure.
Now that you know who does what, you can use that knowledge to make investment decisions. You can often check who’s on the board, who the chiefs are, and who does the auditing on each company’s website.
Do some due diligence by searching people’s names, and compare the results against what they’re responsible for. Then, ask yourself if you think the company’s in good hands. If you’re happy, then you might want to invest! And if you’re not, then you can repeat the process with another company.
Ok, now for the legal bit
Investing involves risk. You aren’t guaranteed to make money, and you might lose the money you start with. We don’t provide personalised advice or recommendations. Any information we provide is general only and current at the time written. You should consider seeking independent legal, financial, taxation or other advice when considering whether an investment is appropriate for your objectives, financial situation or needs.