Monday, July 11, 2011

MD or CEO?



Back in the old days I never heard of CEO and President was always the President of America. Today these American terms have become widely used in the corporate world and I use to get name cards or emails with the owners described as CEO or President. I guess they sound powerful and important, more important sounding than MD or Chairman which are British terms for the top manager of a business organization and head of the organization who is hierarchally higher. Impression aside is there any differences between the 2 positions apart from the fact one set is British and the other American?

A CEO is Chief Executive Officer and an MD Managing Director. Status wise I view CEO as lower ranking to MD because he is not necessarily a director. He is firstly an officer and his job is to execute orders from the Board. Of all the executive officers in his company he is the head so he is CEO. The equivalent of General (or Group General) Manager is the American's Chief Operating Officer or COO. The CEO is answerable to the Board of Directors for the performance and financial returns of the business. A CEO may be a director only if he is appointed in by the nomination committee which comprises board members.

A MD do the same work as a CEO but he is the appointee from the Board to run the business. So a MD is a full-time executive director in charge of the overall business. He wears 2 hats. As a director he is part of the team steering the growth and future of the company. As an executive he takes care of the business and reports to the Board. A MD can be terminated but still remain on the Board unless his directorship is removed by a majority shareholders vote. A CEO who is a non-director runs a greater risk of losing his job for poor performance. Both CEO and MD draw high salaries and perks for the great responsibilities in their jobs.

A CEO is usually recruited from outside for his track records and is contracted to fulfil the objectives for his employer. His appointment is subject to renewal. A MD is usually someone who knows the business well, mostly a co-owner or major shareholder of his company. He will have vested interest to manage the business to his best ability.

Although these titles are used interchangeably there are subtle differences as explained above. Nowadays many companies like to use CEO as it is more fashionable. MD sounds 'old' and colonial and better fitted to older directors while the younger ones prefer to be CEOs. Here, in this picture, Malaysia Airlines decided to cover all bases by describing their chief executive as MD and CEO. Does that add double the stress to him? Maybe, judging by the dismal performance of the national airline this year and his unsmiling face. On the other hand, Air Asia's boss Tony Fernandes (below) did very well in spite of high fuel price.

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