CEO vs CFO

A chief executive officer, commonly known as a CEO, and a chief financial officer, commonly known as a CFO, are two of the highest-ranking leaders in a company. They are both considered part of the C-suite, or C-level, which refers to all of the chief management positions in a company. 

The role and responsibilities of the CEO and CFO differ greatly within a company, and the job of the CEO and CFO will vary greatly from company to company and industry to industry. For instance, the role of a CEO in a technology company will be very different from a CEO who leads a financial institution, such as a bank.

This article will discuss the general roles and responsibilities of the CEO and CFO within an organization and how they both work together to execute a company's mission and objectives.

Chief Executive Officer (CEO)

The chief executive officer (CEO) is the highest-ranking senior executive in a company. They are responsible for overseeing and executing the company's mission and maximizing its value, which will increase shareholders' returns. The CEO is often elected by its board of directors and its shareholders.

It is important to remember that the CEO isn't always the company's founder.

CEO: Board Of Directors

The board of directors is a group of individuals voted in by a company's shareholders to oversee high-level company affairs, such as budget approval. The board is also in charge of electing the CEO.

The CEO of a company usually reports directly to the board of directors; however, it is also common for the CEO to hold a board seat as the board chairman, a position that holds the most influence and power among the directors.

It is also common for a CEO to sit on the board of other companies. For example, Tim Cook, the CEO of Apple, sits on the board of Nike, Inc.

CEO: Responsibilities

The board of directors usually determines the responsibilities of the CEO. These responsibilities will vary from company to company and the life cycle the business is in. For example, a CEO of a start-up will likely be more involved in the company's day-to-day operations than a CEO of a large consumer packaged goods company.

The responsibilities of the CEO are, usually, very high level and include:

• Executing a strategy set out by the board of directors.
• Growing the company in size and profits.
• Increasing shareholder value.
• Overseeing all segments of the company. Segments may include human resources, finance, and technology.
• Speaking to analysts and the press during earnings calls.

Given the CEO's role of overseeing the company's success, they are often held accountable when the company is underperforming. If the company is underperforming, shareholders and the board of directors may vote the CEO out of the company. If the company is public and large, the outgoing CEO usually receives payment in the form of a golden parachute, which is a lucrative severance package that includes their salary, bonus, and other forms of compensation.

Chief Financial Officer (CFO)

The chief financial officer (CFO), who is often viewed as the second or third in command behind the CEO, oversees a company's financial activities. These financial activities include FP&A (financial planning and analysis), financial reporting, and financial accounting. The CFO usually reports to the CEO and board of directors. Like the CEO, they may also have a seat on the board.

CFO: Responsibilities

The chief financial officer (CFO) is responsible for overseeing the company's finance operations and decisions and reports directly to the CEO and the board of directors.

Some of these responsibilities include:

• Executing the financial strategy of the company.
• Ensuring the company has enough funds to pursue new strategies and mitigate risks.
• Creating a company's annual budget.
• Working with financial partners, which include banks and insurance.
• Overseeing new capital investments and potential acquisitions.
• Overseeing accurate financial reporting.
• Speaking to analysts during earnings calls.

CFO: Influence

Depending on the company and industry, the CFO can have a large influence over the company's strategy. For example, at a financial institution, such as a bank, the CFO is often the next in line to succeed the CEO if they were to leave.

CEO Vs. CFO

The CEO and CFO of a company differ in their responsibilities, reporting hierarchy, and influence. These differences are discussed in greater detail below.

CEO Vs. CFO: Key Responsibilities

The CEO's main responsibility is to ensure that the company is moving towards achieving the strategic goals, keeping in touch with managers and supervisors to learn of new developments and challenges, and ensuring that all departments work flawlessly together. They do not participate in the company's day-to-day operations but instead, look at the overall picture.

Instead, they are responsible for communicating the company's goals to its various stakeholders in ways they can understand. For example, they may need to explain to the technical team how to work with the sales team (two teams notorious for not working together) to generate the best possible outcome for the company.

On the other hand, the CFO is in charge of overseeing the financial side of the organization. They are responsible for accurate financial reporting, budgeting, and monitoring new and current capital investments and can be considered the highest-ranking financial manager of the organization.

CEO Vs. CFO: Reporting Hierarchy

The CEO is the highest-ranking senior executive in a company and reports directly to the board of directors. 

Since the CEO is the leader of the entire organization, the CFO usually reports to the CEO. They usually provide financial information to the CEO that helps them make informed decisions. However, in many instances, the CFO may also have a seat on the board of directors.

CEO Vs. CFO: Influence

The CEO influences the entire organization. They are required to establish the company culture, take business decisions, develop leaders, and maintain the company's image in the eyes of the public.

The CFO influences the financial strategy and financial reporting of the company. 

CEO vs. CFO: Strategy

The CEO is responsible for the organization's overall strategy, as well as the means used to accomplish that strategy.

On the other hand, the CFO is only responsible for the organization's financial strategy, which in turn is designed to support the organization's corporate strategy.

More Resources

To keep advancing your career, the additional resources below will be useful:

• Financial Risk Manager (FRM®)
• Chartered Business Valuator (CBV)
• CPA vs CFA®
• Chartered Financial Analyst (CFA®)