Managing director and CEO positions are among the most coveted in the corporate world, and many aspire to reach these ranks. Due to the overlap in their responsibilities, it’s common for people to use the terms interchangeably. In this discussion of managing director vs CEO, we will explore the distinctions between the roles and what each position entails.
The primary difference is that the CEO is responsible for overseeing the general performance of the entire company and setting its strategic direction. In contrast, the managing director focuses on a specific business unit or project, implementing the CEO’s or board’s strategic direction and managing day-to-day operations.
However, the differences between a managing director and a CEO go beyond their priorities and primary responsibilities. These distinctions also encompass their positions, powers, reporting structures, accountability, strategic involvement, decision-making authority, visibility, and compensation.
Despite these differences, both roles share several similarities, which we will explore in this guide. Ultimately, this guide aims to help you understand the distinctions between the two corporate leaders and what it takes to fulfill either role. Let’s dive in!
Key Takeaway:
- The CEO is the highest-ranking executive in a company and leads the C-suite leadership team.
- The CEO’s primary responsibilities include setting the company’s strategic direction, overseeing senior management, developing the company’s mission statement, establishing workplace culture, representing the company in external matters, and managing the budget.
- The managing director is the highest-ranked executive outside the C-suite who reports openly to the CEO or the board of directors.
- Key duties of the managing director include overseeing daily operations, implementing company policies and strategies, managing personnel, handling project management, overseeing recruitment, and reporting to the CEO or the board.
- Regarding decision-making authority, the CEO ranks higher than the managing director. The managing director reports to the CEO, but not vice versa.
- In some cases, especially in small companies or startups, one individual may serve as the CEO and managing director if the company constitution permits it.
Managing Director Vs CEO Key Differences (Overview)
| – | Managing Director | CEO |
| Position | Outside the C-suite executive | Part of the C-suite executive |
| Priority | Company’s day-to-day operations | Setting strategic direction |
| Key Responsibility | Oversees a specific business unit or project | Oversees the performance of the entire company |
| Powers | Highest-ranking executive outside the C-suite | Senior most ranking executive and head of the C-suite leadership |
| Reporting Structure | Reports to the CEO or board (in absence of the CEO) | Only reports to the board |
| Accountability | Accountable for the performance of a specific business unit or project they oversee | Responsible for the performance of the entire company |
| Strategic Involvement | In-ward focus (focus more on implementation of strategies) | Broader focus (focus on wide stakeholder engagement and setting strategies) |
| Decision-Making Capacity | Day-to-day operational decisions | Strategic ‘future-focused’ decisions |
| Publicity | Non-public-facing role | Public-facing role |
| Compensation | Lower than the CEO’s | Highest earner in the company |
Who is the CEO?
The CEO (Chief Executive Officer) is the highest-ranking executive in a company and serves as the head of the C-suite leadership. “C-suite” refers to the top-ranking employees within an organization’s hierarchy responsible for making critical strategic decisions. Achieving a position in the C-suite is often considered the pinnacle of a corporate career.
The “C” in C-suite stands for “chief.” In addition to the CEO, other members of the C-level executive team who report directly to the CEO include:
- Chief Operating Officer (COO)
- Chief Financial Officer (CFO)
- Chief Information Officer (CIO)
- Chief Marketing Officer (CMO)
- Chief Technology Officer (CTO)
- Chief Compliance Officer (CCO)
- Chief Human Resource Officer (CHRO)
What are the Roles of the CEO?
As the C-suite leader and the company’s most influential executive, the CEO plays a critical role. Some of the key responsibilities include:
- Setting Strategic Direction: CEOs are visionaries for the company. They establish the organization’s long-term strategy and goals. CEOs are strategic thinkers who base their decisions on market indicators such as economic trends, demand, and regulatory changes.
- Overseeing Senior Management: The CEO supervises all senior executives and managers who report directly to them. They evaluate the overall performance of top executives to ensure high job quality.
- Engaging Stakeholders: Before making decisions, the CEO interacts with various stakeholders, including the board, employees, customers, investors, and regulators, to address issues that affect them and the company. Their decision-making typically considers the best interests of these stakeholders.
- Developing the Mission Statement: The CEO articulates the organization’s values through a concise mission statement. This statement usually outlines both the company’s long-term and short-term goals.
- Establishing Workplace Culture: The CEO sets ethical standards and behaviors to foster a specific mood and environment. This is done by implementing policies that promote their desired workplace culture.
- Representing the Company: The CEO serves as the company’s public face at public events, helping to build and maintain its image. CEOs are approachable and relatable as public figures, using every opportunity to engage stakeholders and demonstrate social responsibility.
- Managing the Company’s Budget: The CEO oversees budget planning and capital allocation to ensure effective outcomes. They are responsible for the company’s overall financial performance, which begins with proper budgeting.
Who is the Managing Director?
The Managing Director (MD) is the highest-ranking executive outside the C-suite and ranks just below the CEO, as they are not part of the C-level executive team. While the CEO oversees the company’s entire operations—including all departments—the MD focuses on specific projects or business units, which they oversee and report to the CEO or, in the CEO’s absence, to the board of directors. The MD’s typical duties include managing the company’s day-to-day operations.
What are the Roles of the Managing Director?
As the most influential executive outside the C-suite, the Managing Director’s role in a company is invaluable. Their responsibilities include:
- Overseeing Daily Operations: The MD is responsible for the company’s day-to-day running. They lead in product launches, fieldwork, staff supervision, and budget proposals.
- Implementing Policies and Strategies: While the MD does not set policies and company strategies (that is the duty of the CEO and board of directors), they are responsible for implementing them. Their job is to help the teams they oversee execute these strategies and policies effectively.
- Managing Personnel: The MD supervises the performance of departmental and project managers and is actively involved in mentoring individuals who aim to advance in their corporate careers.
- Project Management: The MD oversees the daily operations of specific projects, ensuring they run smoothly. They also handle planning and resource allocation, which is essential for successful project completion.
- Recruitment: The MD collaborates with the human resources department to help the company hire the right people. They may be involved in the final evaluation of top executives to assess their suitability for the company.
- Reporting to the CEO or Board: Ultimately, an MD is not their boss; they report to someone—typically the CEO. In the CEO’s absence, or according to company policy, the MD may report directly to the board of directors. They periodically share performance reports with both the CEO and the board.
Who Ranks Higher: CEO or Managing Director?
Regarding the chain of command and decision-making authority, the CEO holds a higher position than the Managing Director (MD). The MD reports to the CEO, not the other way around. The CEO makes key strategic decisions that shape the company’s future and is directly accountable to the board of directors.
In contrast, the MD focuses on operational decisions and oversees the company’s day-to-day activities, implementing strategies and policies set by the CEO and the board. Therefore, in a corporate environment, the ultimate authority rests with the CEO.
Can the Managing Director and CEO Be the Same Person?
Yes, the Managing Director and the Chief Executive Officer can be the same person in a company. This arrangement typically depends on two factors: the size of the company and its constitutional guidelines.
In smaller companies or startups, where resources are limited and the number of employees is few, it is common for one person—often a founder—to hold both the MD and CEO positions.
A person can also serve as the MD and founder if the company’s constitution permits it. The company constitution may sometimes allow combining these roles for a certain period. However, as the company grows, it may choose to separate the two roles, appointing different individuals to serve as the CEO and MD.
Managing Director vs. CEO: A Comparison
The roles of managing director and CEO have several distinct differences. Let’s break them down:
1. Position
The CEO is part of the C-suite executives, while the managing director is not. The CEO is not just an ordinary C-level executive; they head the team, and everyone reports to them.
2. Priority
The managing director’s primary focus is the company’s daily operations. They direct the day-to-day activities within the business line or project they oversee, ensuring that all efforts align with the company’s strategic direction.
In contrast, the CEO sets the company’s strategic plan. They define the strategic vision and long-term goals they expect the managing director to help implement.
3. Key Responsibilities
A managing director’s key responsibility is overseeing the operations of a specific business line or project. In contrast, the CEO oversees the entire company’s operations, holding a much bigger responsibility for its overall success than just a single project or business line.
4. Power
The CEO possesses ultimate decision-making power within the organization concerning key corporate matters. They are accountable to the board but sit at the pinnacle of executive authority.
The managing director, however, is not a member of the C-suite and ranks lower than the CEO; they report to the CEO, which limits their power to issues affecting the specific business unit, project, or department they oversee.
5. Reporting Structure
The CEO reports only to the board of directors. As the highest-ranked executive in the C-suite, the CEO oversees other executives but does not report to them. Conversely, the managing director reports to the CEO. However, in the CEO’s absence or if company policy allows, the managing director may report directly to the board of directors.
6. Accountability
Managing directors are generally accountable for the operations and performance of a specific business unit or project. They report to the CEO or the board. In contrast, the CEO is responsible for the company’s overall performance, overseeing multiple units and projects rather than just one.
7. Strategic Involvement
A managing director is primarily inward-focused, while a CEO takes a broader view regarding involvement in the company’s business strategies. The CEO engages various stakeholders before developing any company strategy or policy. In contrast, the managing director engages with a limited number of internal stakeholders, setting strategies they implement.
8. Decision-Making Capacity
Since the managing director oversees daily operations, they can only make operational decisions aligned with the company’s objectives and strategies. On the other hand, the CEO makes strategic decisions and is involved in setting the company’s long-term goals and corporate direction, with decisions that directly impact the company’s future.
9. Public Role
CEOs have a public-facing role and are expected to maintain a particular persona or image in public. A strong public image is essential for attracting customers and enhancing the company’s reputation. In contrast, managing directors do not typically have a public-facing role and mainly work behind the scenes, interacting more with employees.
10. Compensation
As the highest-ranking executive, the CEO generally earns a higher salary than a managing director—unless the managing director performs the CEO’s duties in a setting where the CEO position does not exist.
The national average salary for managing directors is around $84,753, while that of CEOs is approximately $128,748. However, these figures can vary based on company size, geographic location, and work experience.
Similarities Between Managing Director and CEO
After examining the differences between a Managing Director (MD) and a Chief Executive Officer (CEO), it’s essential to highlight the similarities between the two roles:
a) Oversight Role
Both MDs and CEOs have oversight responsibilities, though their specific duties differ. The MD typically oversees a particular business unit or project, while the CEO supervises multiple divisions and is accountable for the company’s overall performance.
b) Decision-Making
Despite the differences in their decision-making responsibilities, the CEO and MD make critical decisions for the organization. The MD focuses on operational decisions that pertain to the day-to-day operations. At the same time, the CEO is responsible for strategic decisions that influence the company’s future direction.
c) Strategic Involvement
The CEO and MD are engaged in the company’s strategic initiatives, albeit in different ways. The CEO formulates and sets the company’s strategies, which are then handed to the MD for implementation. The MD ensures that all activities align with the company’s strategic objectives.
d) Work Environment
MDs and CEOs often collaborate closely in the workplace. Although they may have separate offices within the same complex, they frequently interact with the same staff, attend meetings together, and sometimes meet with potential clients or investors. The CEO delegates certain responsibilities to the MD, who reports directly to them.
e) Company Types
CEOs and MDs work in public and private companies, including nonprofits, family-owned businesses, and corporations. They also work in various industries, from manufacturing and tourism to technology and entertainment.
In smaller companies, the roles of MD and CEO are often combined. In contrast, larger organizations typically separate the two positions to define their roles and responsibilities clearly.
f) Educational Qualifications
Both MDs and CEOs generally require similar educational backgrounds. Most companies expect candidates to hold at least a bachelor’s degree from a reputable university in a business-related field, such as Business Administration or Economics. A master’s degree in a related field or business certifications can be advantageous. Additionally, candidates may need specialized training and experience in entrepreneurship, marketing, accounting, and corporate strategy.
g) Skills
MDs and CEOs share several essential skills that contribute to their effectiveness in their roles, including:
– Strategic planning
– Effective communication
– Interpersonal skills
– Leadership
– Analytical skills
– Administrative skills
– Financial acumen
– Project management
– Conflict resolution
Should I Call Myself CEO or Managing Director?
Deciding whether to refer to yourself as a CEO or Managing Director is often a personal choice. However, using the title “Managing Director” for small companies or startups is generally more appropriate. Referring to oneself as a CEO can be overly flattering, especially for businesses under three years old.
As your company expands, hires more staff, and your responsibilities increase, you might consider adopting the title of CEO. At this point, you can either take on the CEO role yourself or appoint someone else as Managing Director, clearly defining the roles between the two positions.
Wrapping Up!
Now that the debate between the Managing Director and CEO has been addressed, we hope you better understand the responsibilities of each title. At the Center for Corporate Governance, our mission is to inform and educate corporate executives and leaders about their roles, emerging trends, and best practices, giving them a competitive edge.
Join us for our monthly corporate governance training sessions to learn more about becoming an effective corporate leader, advancing your career, and setting the pace in the corporate world.
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