How much power does Bill Gates have?
August 1, 2007 3:40 PM   Subscribe

Are CEOs more like presidents or dictators?

This is something I've been curious about for a long time...

How is the power of CEOs exactly defined? If a company owns a building that has operating hours of, say, 8am-9pm, can the CEO get into the building at 10pm? Obviously, the answer is probably yes, but where is this power granted, and how far does it extend? Can the CEO make a unilateral decision that only macaroni and cheese be served in the cafeteria? Can she fire a janitor because the bathroom isn't clean enough? Why or why not?

Basically, are CEOs more like presidents, who (theoretically) have to live within laws (rules), or are they more like dictators with respect to their companies?

How is this all spelled out?
posted by mpls2 to Work & Money (15 answers total) 1 user marked this as a favorite
Best answer: I don't think things are as defined as strictly as you think they are.

What can you get away with at work? Whatever your manager (and everyone above him or her) allows.

What can a CEO get away with at work? Whatever the Board of Directors of the company allows.
posted by xil at 3:48 PM on August 1, 2007

I assume you mean a public company. Then, the answer is shareholders and the Board of Directors. See also Corporate Governance.

Theoretically the CEO could fire a janitor, yes. But they were hired to make higher-level decisions, to run the company and delegate to their executives, not to evaluate the janitors.

In a privately-owned company, the answer is: more like dictators.

In all cases, the CEO is bound by the law of course, including employment law and securities laws. Meaning he can't fire the janitor for discriminatory reasons (e.g. race, sex, age etc.)
posted by vacapinta at 3:53 PM on August 1, 2007

I've found that the smaller the company, the more dictator-like the CEO is. The real question is whether the dictator is enlightened, benign, or a despot.

As far as the Board goes, well, that relationship can be highly malleable. For instance, at my last employer, the CEO was also head of the Board. Not sure if that was kosher, but that's the way it was. He got/did whatever he wanted.
posted by Thorzdad at 3:53 PM on August 1, 2007

I agree with xil - if the company even has a board of directors. If they don't, then the C.E.O. can do whatever they want. It is just a title after all. Poster, you can be C.E.O. of MPLS2 Enterprises simply if you say that's what you are. You can hire people and fire them for whatever you want. Though you might get sued / prosecuted if you don't follow laws governing employment.
posted by dendrite at 3:54 PM on August 1, 2007

My understanding is that stockholders vote on who will be on the Board of Directors (with voting power proportional to shares, hence the ability for a hostile takeover). The Board of Directors hires/fires the CEO. In the case where the CEO owns a majority of the shares, they would mostly answer to federal, state and local laws (For instance, the SEC, FTC, etc...). A CEO's power might also be held in check by labor unions. For instance, a CEO firing a janitor in some jurisdictions would have to make sure that they were not violating fair labor laws or union contracts. But that's just what I've pieced together, so hopefully someone with more knowledge will speak up.
posted by Skwirl at 3:56 PM on August 1, 2007

Power is not defined in absolute terms. It is a construct that is defined by the fabric of social interaction, which can be defined explicitly (laws, bylaws, rules, regulations) or implicitly (negotiated by subtle undefined social structures). So the answer is: it depends.
posted by |n$eCur3 at 4:01 PM on August 1, 2007

Presidents are often figureheads.

I suppose one can be dictatorial only up unto a point- then the slaves revolt!

A CEO in all likelihood does not have time to deal with minutiae such as cafeteria fare and janitorial stuff. It's called delegating.
posted by solongxenon at 4:06 PM on August 1, 2007

At a very large organization, the limiting factor on effective CEO power is the CEO's ability to find out what the hell is going on.
posted by lbergstr at 4:57 PM on August 1, 2007

Response by poster: why can the CEO fire the CFO, but not the other way? where is that defined? i mean, if it ever came to trial, there would have to be evidence of a legal power hierarchy, no?
posted by mpls2 at 5:23 PM on August 1, 2007

Those names are just words. Who, exactly, has the power, how much, and how they use it varies from company to company and there is little or no correlation to what title they have.

In the book "Up the Organization", Robert Townsend said that the true ruling power in one major corporation had the title "Chairman of the Executive Committee". Tell me what in hell that means.

The one thing that is absolutely certain is that whoever it is that has the power has a legal fiduciary responsibility to the stockholders -- but little or no responsibility to his subordinates. By law, if the interests of stockholders come into conflict with the interest of employees, the ruler of a corporation is required to favor the stockholders. If he does not do so, he can be sued by the stockholders and his personal wealth can be seized for damages.

Calling the President/CEO/Chairman-of-the-Executive-Committee a despot or a dictator or a fascist doesn't change that.
posted by Steven C. Den Beste at 5:49 PM on August 1, 2007

Best answer: In a large American public company, the CEO's power is (loosely) defined by the Board of Directors. In most cases, he has the power to hire and fire other senior officers and to be the final authority on financial and strategic decisions of middle importance.

It is regarded as improper for the CEO to make minor decisions, and major decisions are reserved to the Board of Directors, although the CEO will usually make recommendations.

The hypothetical you propose about entering a building after hours raises an interesting distinction between power and policy. While a CEO usually has the power to change a policy, a well-run company requires an orderly process for such changes, and doesn't permit even the CEO to violate that policy in the meantime.

To get specific, in the unlikely absence of a policy that the CEO can come and go whenever he pleases, it would be regarded as quite inappropriate for the CEO to order a security guard to let him during hours when the security guard wasn't supposed to let anyone in. Instead, the CEO's correct move would be to call whoever is in charge of corporate security, and ask him to send down an order to proper channels. That gives the head of corporate security the opportunity to advise the CEO of any policy-based reason why he shouldn't be admitted, and to refuse the CEO access if it doesn't appear that access is warranted. The $12 an hour security guard wouldn't have the knowledge or courage to do either thing.
posted by MattD at 6:30 PM on August 1, 2007

>why can the CEO fire the CFO, but not the other way? where is that defined?

Custom and usage. It is understood that the CEO is the top executive, hence his name, and that all others report to him. A company could enact bylaws that specify that a person with the title CFO would be the top dog, but why would it? The title carries with it certain connotations in appearances to the outside world.
posted by megatherium at 8:00 PM on August 1, 2007

Neither. "Parent" would be a better analogy in terms of the real world.
posted by bkeene12 at 8:33 PM on August 1, 2007

About a year ago, the Wall Street Journal had a fantastic op-ed saying the dictators and CEOs have the same personalities.

Under capitalism, their autocratic (and sometimes capricious) behavior can be diverted to useful purposes. The author argued that in another country and another time, Steve Jobs would have been another Stalin, but capitalism saved him and the rest of the world from that fate.
posted by GarageWine at 9:31 PM on August 1, 2007

Best answer: Why can the CEO fire the CFO? Well. in most organisations the CEO is above the CFO on the organisational chart, which shows as you put it, the hierarchy of power in the organisation.

I agree with most posters here though, the suggested power in a corporation and the actual power are often far apart.

Your example of Bill Gates in the title is a good example of this. AFAIK, Bill Gates is not longer CEO of Microsoft (it's Steve Ballmer), and is simply listed as Founder, which means that he doesn't appear on the org chart and has no power according to that org chart... However, I suspect that if Bill said he wanted somebody to get the sack, they'd still have to leave the building with a box (!), even if the official order came from Ballmer...
posted by ranglin at 12:07 AM on August 2, 2007

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