The roles of Chief Executive Officer (CEO) and Managing Director (MD) are two of the most senior positions within a company. Both hold considerable power and influence over an organization’s operations, strategy and culture. However, there is often confusion over which role is higher or more senior – CEO or MD?
In this article, we will compare the roles and responsibilities of CEOs and MDs. We will look at the key differences between the positions, their relative seniority, as well as factors that determine which role is considered higher within specific organizations. Gaining clarity on whether a CEO or MD has greater authority can be useful for professionals aspiring towards leadership positions and help provide context for corporate governance discussions.
Definition of CEO
The CEO is the highest ranking executive manager or administrator in an organization. As chief executive, the CEO is ultimately responsible for all managerial decisions and oversees the operations of the entire company.
The key responsibilities of a CEO include:
Strategic Planning
– Developing and implementing high-level strategies, making major corporate decisions, managing overall operations and resources to achieve growth and increase shareholder value.
Leadership
– Providing leadership and direction to senior management team and maintaining operations consistency with the company’s core mission and vision.
Financial Performance
– Responsible for the overall financial health and growth of the organization. This includes developing financial plans, monitoring revenue and expenses, and taking corrective actions when required.
External Relations
– Serving as the public face of the company and primary liaison between the board of directors, shareholders, investors, industry partners and media.
Compliance
– Ensuring company-wide legal and regulatory compliance, maintaining corporate governance standards, assessing risks and establishing adequate internal controls.
Talent Management
– Overseeing recruitment and retention of senior executives. Setting HR policies in line with business objectives and promoting an ethical, high-performance organizational culture.
So in summary, the CEO is the highest authority within a company responsible for the overall vision, management and accountability for an organization.
Definition of MD
The Managing Director (MD) is a senior executive who oversees the daily operations and management of a company. The key responsibilities of an MD include:
Daily Operations
– Managing workflows, supervising middle and lower-level management and directing daily operational activities across business units and functions.
Strategy Implementation
– Converting high-level plans and directives set by CEO and board into actionable implementation plans customized for business units. Monitoring progress and performance.
Leadership
– Leading and motivating teams of managers and employees to achieve business objectives and KPIs through coordination and delegation.
Financial Management
– Developing and managing budgets, controlling costs, monitoring cash flow, mitigating financial risks and supporting growth targets.
Talent Management
– Recruiting, training and mentoring staff under their management umbrella. Setting team KPIs and benchmarks.
Reporting
– Keeping the CEO and board updated on progress through regular management reports, metrics and proposals. Identifying improvement areas.
So in essence, the MD role is focused on translating strategic vision into tangible results by directing day-to-day management and operations. The MD oversees functional managers to execute activities in line with the company’s overall plan.
The Primary Differences Between CEO and MD Roles
While a CEO and MD hold senior leadership positions within a company, there are some key differences between the two roles:
Key Differences
| CEO | MD |
|---|---|
| Sets overall corporate strategy and vision | Implements strategic plan at functional/business unit level |
| Maximizes value for shareholders and external stakeholders | Delivers operational results within each unit |
| Broader focus on long-term growth and competitiveness | Short-medium term execution of business objectives |
| External orientation – industry networks, regulators, investors | Internal orientation – managers, workflows, KPIs |
| Topmost authority and decision maker | Reports to CEO and board of directors |
As the table summarizes, CEOs concentrate on the overall vision and direction of the company. They interact externally to position the organization competitively. MDs have an internal focus on execution by overseeing divisional performance and operational processes under the broader corporate strategy. The CEO role is centralized while the MD role is decentralized across business units.
Is a CEO Higher than an MD?
In most corporate structures, the CEO ranks above the MD. As chief executive, the CEO has the highest authority for making strategic decisions for the company. The MD is responsible for directing business units to execute according to the CEO’s broader plan.
The CEO is answerable to the board of directors and shareholders. The MD reports directly to the CEO along with other C-Suite executives like Chief Operating Officer (COO) or Chief Financial Officer (CFO). So the CEO will have overall responsibility for the MD’s performance and results.
The CEO also acts as the main point of communication between the board and the MD. Strategic plans created by the CEO are passed down to the MD for implementation. The MD gives feedback regarding operations but major decisions need to be approved at the CEO level.
So in summary, the CEO sits atop the corporate hierarchy. They are responsible for the MD but the MD is not directly responsible for the CEO. This defines the superior-subordinate relationship where the CEO rank is higher.
When is an MD Considered Higher than CEO?
There are some corporate structures where an MD may be considered senior to the CEO due to certain factors:
Multiple Business Units
In a group company structure with many semi-autonomous business units under one corporate umbrella, powerful MDs often drive their own units independently. The group CEO plays an advisory role and MD wields greater authority for their sphere of business.
Founder MDs
Founders who become Managing Directors of companies they created maintain control as both MD and majority shareholders. The CEO is often hired for their professional expertise but the MD founder remains the key decision maker.
Separate Subsidiary
A wholly-owned but separate subsidiary of a parent company may designate its head as MD with a narrower CEO role underneath focused only on subsidiary operations.
Country Managers
For multinational companies, the country head is often an MD overseeing national operations with a local CEO responsible for subsidiary in that country. The MD ranks higher than the national subsidiary CEO.
Partnership Firms
The senior or managing partner of a large partnership firm (accounting, legal, consulting) is appointed as MD who guides appointed CEOs of geographies/sub-service lines. Partner MDs control CEO roles.
So while typically CEOs have higher authority than MDs, there are scenarios where the opposite occurs based on company structures and shareholding patterns. The extent of power invested in the MD versus CEO roles depends on the specific organization.
Typical Career Paths to Becoming a CEO or MD
The typical career paths to becoming a CEO or MD differ slightly given the variations in their roles:
Typical Career Path to CEO
– Obtain undergraduate degree in business administration, finance or related field. Pursue MBA for management expertise.
– Start career in entry level position after MBA – focus on performance and technical competency
– Promoted to managerial roles with profit and loss responsibilities. Gain experience leading cross-functional teams.
– Shift to broader strategic roles as SVP/EVP level directing multiple business units or divisions
– Leverage networks to join board of directors of other companies or industry organizations
– Appointed President or COO to gain enterprise-wide responsibilities and visibility
– Finally advance to CEO role after demonstrated leadership capability and strategic perspective
Typical Career Path to MD
– Complete bachelor’s and master’s degree in business management, operations or engineering
– Join company at junior executive level and specialize in particular function – marketing, sales, HR etc
– Promoted to senior manager with independent departmental oversight and P&L duties
– Build credibility by excelling in GM positions across regional divisions or country offices
– Shift to corporate headquarters as SVP/EVP leading international expansion initiatives
– Appointed as Country Head or President of large Business Unit on strong unit leadership
– Finally get promoted as Group/Division Managing Director for full operational control
So while both roles require demonstration of leadership skills, the path to MD involves more hands-on operational experience while the path to CEO requires greater strategy experience across units.
Difference Between a CEO and MD in a Startup
Within startups, the distinction between CEO and MD roles also exists but on a smaller scale:
CEO in a Startup
– Often the founder who created the startup and has controlling equity
– Responsible for identifying market opportunity and product-market fit
– Secures initial round of funding through angel investors or VC firms
– Drives strategy, technology development, customer acquisition and talent hiring
– Manages cash flows in early years to turn profitable and tap growth funding
– Varify and refine business model, analytics to meet revenue milestones.
– External facing to keep investors updated and attract partners or buyers
MD in a Startup
– Founder or experienced hire brought in at later stages
– Oversees daily operations, team management and workflows to scale efficiently
– Streamlines processes, installs KPIs/dashboards and progress tracking systems
– Analyzes costs and unit economics. Optimizes marketing and sales channels.
– Expands product portfolio and geographic markets once initial traction achieved
– Ensures service quality and customer satisfaction as userbase grows
– Drives departments and resources to hit growth targets guided by CEO vision
Both roles are critically involved in a startup’s formative years. The CEO provides strategic direction while the MD oversees internal execution and delivery.
Conclusion
In summary, the CEO generally holds greater authority and scope than the MD role within most organizations. As chief executive, the CEO sits atop the management hierarchy driving corporate strategy and external positioning. The MD acts an executive operational leader translating the strategic vision into day-to-day business results across units.
However, in certain matrixed group structures or country specific subsidiaries – an empowered MD may have higher influence than a narrowly focused CEO. Roles can also differ in small startups between founder CEOs versus professional MDs.
Understanding the nuances between the two roles and typical career progression paths allows professionals to better navigate their own career trajectories towards leadership positions. The demarcations are not always clearcut and depend on individual company dynamics and reporting structures between the board, CEO and MD.