CEO vs Managing Director: What’s the Difference?

Have you ever wondered who the boss of your boss is? Is it the CEO or the Managing Director? There is a lot of confusion about the roles and responsibilities of CEOs and Managing Directors. To begin with, the CEO of an organization is the top decision-maker. They make all significant decisions for the company and report directly to the board of directors. On the other hand, a Managing Director is a high-ranking executive in charge of a specific business division or product. They report to the CEO and are responsible for ensuring that all business operations run fairly, effectively, and efficiently.

Let’s understand these senior managers a little better by looking at some of the differences between a CEO and a Managing Director.

What is a Chief Executive Officer (CEO)?

First, let’s start with the CEO. A Chief Executive Officer is the highest-ranking executive of an organization. The CEO represents the company to its board of directors, stockholders, customers, and employees. The CEO ensures that company executives abide by the rules and regulations with which the business is expected to operate successfully within its industry.

Roles and Responsibilities of the CEO

Here are some of the roles and responsibilities of the CEO:

• The CEO makes final decisions on major company policies and oversees all key business operations.
• The CEO works closely with the board of directors and ensures that they are continually increasing shareholder value and the wealth of all company employees.
• The CEO hires, fires, and assigns duties to other executives such as the Managing Director and department heads.
• The CEO oversees major new business projects and identifies ways to increase revenue and profitability.

What is a Managing Director (MD)?

Next, let’s look at the Managing Director. The Managing Director is a senior executive who oversees an arm of the company and is responsible for ensuring that all department managers and employees are working toward company goals. This executive ensures that key products or services are being supplied effectively and efficiently and develops new ways to improve the company’s bottom line.

Roles and Responsibilities of the MD

Here are some of the roles and responsibilities of a Managing Director:

• The MD makes sure that all company employees follow established company rules and regulations.
• The MD oversees the day-to-day production, operations, and sales of a specific company division.
• The MD ensures that company employees follow all company policies and procedures. Employees are required to report any discrepancies or violations of these rules to their division head.
• The MD reports directly to the CEO about how effective or ineffective certain business practices are.

Chief Executive Officer vs Managing Director: Key Differences

Now that we have a better understanding of CEOs’ and MDs’ roles and responsibilities let’s look at some key differences between them.

1. Differences in Job Duties: The primary role of the CEO is to oversee all major decisions for the company. The primary role of an MD is to oversee all day-to-day business operations within a specific division of the company.

2. Position and Status: The CEO is typically more senior than an MD and may report directly to a board of directors. An MD, on the other hand, typically reports to the CEO and has authority over some or all employees within their division.

3. Salary Differences: Typically, CEOs have higher salaries than MDs. This is because CEOs oversee the entire company and take on additional responsibilities such as ensuring that shareholder value and employee wealth increase.

4. Final Authority: The CEO typically has final authority over major business decisions and operations because they oversee all company operations and report directly to a board of directors. The MD, on the other hand, typically lacks final authority because they report to the CEO and oversee only a specific company division.

5. Authority Over Employees: The CEO has authority over all employees, whereas the MD typically only has authority over those who work for their specific company division.

6. Qualifications and Training: Typically, the CEO has a more advanced degree and greater experience than an MD. The CEO also has both the experience and education to oversee all major business operations for a company. An MD typically only has expertise in one or two business areas and is promoted from within the company.

7. Accountability: The CEO is typically held more accountable to their board of directors than the MD is. On the other hand, the MD faces greater pressure from employees and supervisors within their own division.

Conclusion: CEO vs Managing Director

In some cases, the titles of CEO and Managing Director are held by the same person. This is most common when the CEO is also the company’s founder. While this isn’t unusual, however, in larger and more complex companies, these titles may be held by different people.

Knowing the key differences between a CEO and an MD will help you understand their different roles within a company. CEOs make broad company decisions and oversee all major business operations. MDs, on the other hand, oversee only a specific division within a company and ensure that employees follow established company policies and procedures.