What’s the Difference Between CEOs and Chairmen?

On Thursday, Microsoft founder Bill Gates announced that he was handing over the job of CEO to the company’s president, Steve Ballmer. Gates said that he would remain Microsoft’s chairman. And on Monday, when America Online announced its merger with Time Warner, AOL’s Steve Case was designated chairman of the new corporation, and Time Warner’s Gerald Levin was given the position of chief executive officer. What’s the difference between these two jobs? And which one is more powerful? 

The CEO is a company’s top decision-maker, and all other executives answer to him or her. The CEO typically delegates many of the tactical responsibilities to other managers, focusing instead on strategic issues, such as which markets to enter, how to take on the competition, and which companies to form partnerships with. This is in contrast to the chief operating officer or president, who oversees day-to-day operations and logistics. The CEO is ultimately accountable to the board of directors for the company’s performance.

The chairman of a company is the head of its board of directors. The board is elected by shareholders and is responsible for protecting investors’ interests, such as the company’s profitability and stability. It usually meets several times a year to set long-term goals, review financial results, evaluate the performance of high-level managers, and vote on important strategic moves proposed by the CEO. Directors appoint–and can fire–upper-level managers such as the CEO and president. The chairman typically wields substantial power in setting the board’s agenda and determining the outcome of votes. But he or she does not necessarily play an active role in everyday management.

The balance of power between the CEO and the chairman varies widely from company to company. Because the CEO cannot make major moves without the board’s assent, and his or her job security depends on their satisfaction, the chairman of the board is technically his or her superior. And an active chairman may use this power to effectively become the co-head–and ultimate boss–of the corporation. But most chairmen are not so involved, which leaves the CEO with considerable flexibility in running the company. The CEO can also affect the composition of the board of directors through his or her selection of senior executives, many of whom are guaranteed board seats by company bylaws. Sometimes–as was the case with Gates until Thursday, and is still the case with Case and Levin at their current companies–the chairman and CEO are the same person.

Case and Levin have not yet outlined how they will divide leadership responsibilities. However, the press release announcing the AOL-Time Warner merger says that Case will play “an active role” in leading the company and that Levin will work “closely with Mr. Case” in setting its strategy. Most analysts interpret this to mean that Case, as chairman, will use his power to its fullest, giving him an upper hand over Levin.

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