The differences between the roles of a CEO and a CFO
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What is a CEO vs. CFO?
People outside the business world often get confused with the roles played by the CEO vs. CFO.The Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) take on different but equally important responsibilities in an organization.
The CEO assumes the main role of overseeing the operations of the entire company, from sales to administration. He holds the highest rank in the company and only reports to the board of directors. On the other hand, the CFO assumes the highest-ranked financial position in the company. The main focus of a CFO is the financial management of the business.
What is a CEO?
The CEO is the most senior manager of an organization, who oversees the activities of the whole organization. Chief executive officers manage different organizations, such as government entities, non-profit organizations, and private and public corporations.
The CEO usually reports to the board of directors of the company and is responsible for maximizing the entity’s value, including revenues, market share, share price, etc. In the government and non-profit sector, chief executive officers typically seek to achieve results that relate to the mission of the organization.
What is a CFO?
The CFO is a senior manager with the primary role of overseeing the management of the company’s finances and financial activities, including financial risk management, financial planning, financial reporting, record-keeping, signing checks, and analysis of data. The CFO is comparable to a controller or treasurer.
The chief financial officer usually reports to the CEO, as well as the board of directors. They may also assume a seat on the board. They are the head of the company’s finance personnel and are also the key financial spokesperson. They normally support the Chief Operating Officer (COO) on both tactical and strategic matters concerning cost-benefit analysis, securing of new funding, forecasting needs, and budget management.
Differences between the CEO and CFO Roles
The significant differences in the roles played by the CEO vs. CFO are listed below:
1. Key Responsibilities
The chief executive officer’s main duty is to keep an eye on the big picture, overseeing the operations in all departments and making sure that the long-term goals of the company are realized. The CEO doesn’t involve himself/herself in the detailed tasks of every department but maintains a general oversight with the aid of department managers.
They usually focus on things like articulating the vision of the company to personnel and potential clients, executing decisions made by the board of directors of the company, developing leadership in the company, encouraging productivity, and ensuring a strong position is maintained in the market.
The CEO is chiefly accountable for the overall company performance. The role is usually determined by the board of directors. On the other hand, the CFO is responsible for the financial part of the company only. The CFO is the top financial manager of the organization. The CFO is, in most cases, responsible for a number of departments that are financial-related, such as budgeting, accounting, compliance, and auditing.
2. Strategy
The CEO assumes the responsibility for the general strategy of the organization and the procedures used to accomplish that strategy. The CFO is in charge of the financial support of the corporate strategy, meaning they ensure that sufficient cash is available to cover strategic needs and alleviate risk.
3. Liaisons
The CFO also plays an important liaison role, since they build relationships with lenders, banks, investors, regulators, and other financial institutions. For instance, the CFO attends meetings with private investors to discuss the latter’s interest in the company or with bankers to create lines of credit.
The CEO is the public face of the company, making speeches and meeting with community leaders and the press.
4. Reporting relationships
The CEO generally reports to the company’s board of directors, while the CFO reports to the CEO. As the chief financial officer, the CFO puts together the annual budgets of the company, analyzes financial data, and tracks expenses and revenues. The CFO may also sit on the board of directors, just like the CEO.
5. Analysis
The CFO handles tasks that need quantitative and qualitative financial analysis. He/she is responsible for reviewing various aspects of the company to ensure that the costs of operations are controlled in a proper manner and that resources are correctly allocated.
The CFO also conducts an analysis of future capital investment of the company and reviews current market trends. He then reports such results to the CEO, who decides how to adjust the operations of the firm to make it more effective and efficient.
6. Development
It is the responsibility of the CEO to search, find, and prepare employees within the firm for positions of management. The CFO finds and grooms personnel within areas of accounting and finance only.
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FAQs
Differences. The CEO is the highest-ranking role in the organization. CEOs and CFOs are not equal in the organizational hierarchy, despite both having 'Chief' in their titles. Generally, the CEO reports to the board of directors, whereas the CFO reports to the CEO.
Does the CFO answer to the CEO? ›
Role and Responsibilities of Chief Financial Officers (CFOs)
The CFO reports to the CEO but remains one of the key personnel in any company. In the financial industry, it is a high-ranking position, and in other industries, it is usually the third-highest position in a company.
How much should a CFO make compared to CEO? ›
CEO in salaries. In most companies, the CEO earns much more than the CFO. According to Salary.com, the average annual salary of a CFO in the US is $420,000, usually ranging from $319,000 to $537,000, while the average salary of a CEO is $800,000 ranging from $420,000 to $1,200,000.
Who answers to the CFO? ›
The CFO relies on the reporting generated by accounting and the financial controller to advise the CEO and board on the company's strategic financial direction. The controller and other functional specialists report to the CFO.
How much should a CFO make based on revenue? ›
Typically, CFOs might expect to receive between . 1% and 3% of a company's value. In some cases, it may be much more, depending on the stage at which the CFO joins the executive leadership or founders.
What percentage of CFOs become CEOs? ›
In the US's largest companies, more CFOs are being tapped for CEO roles. According to the latest Crist Kolder Volatility Report, in 2023, among Fortune 500 and S&P 500 companies, 8.4% of CEOs were promoted directly from CFO positions, up from just 5.8% in 2013.
Who is next in line after CFO? ›
Most management teams have at least a Chief Executive Officer (CEO), a Chief Financial Officer (CFO), and a Chief Operations Officer (COO).
Can a CEO fire whoever they want? ›
The board of directors is the supreme decision-making body of a company, and they can theoretically fire any employee they want. However, in practice, it's usually the CEO who does the firing, with the board's approval. There are a few reasons why the board may choose to directly fire an employee.
Who does the CEO answer too? ›
The CEO reports directly to the board of directors, the party ultimately responsible for matters like environmental, social and governance (ESG), corporate social responsibility (CSR) and even corporate email security.
Can a CEO take $1 salary? ›
However, a notable trend is emerging in the modern business landscape, with certain CEOs steadfastly adhering to it. It may sound unbelievable but there are some CEOs who take $1 for their salary. Yes, you read it right, just $1. Some well-know CEOs have embraced this trend.
The Average private company CFO Salary in 2024
According to CFO.com, the average cash compensation for a CFO in a private company with less than $20MM in annual revenue is $194,354. CFOs for private companies with $21-$99MM in annual revenue make an average of $237,983 in base salary.
Are CFOs overpaid? ›
They are not overpaid; they are just compensated for the tasks placed upon them and the expertise and educational background they bring with them. Managing finances is a demanding responsibility since the entire company depends on money, and a minor error may cause a significant issue for the firm.
Who is more powerful, CEO or CFO? ›
Is the CEO higher than the CFO? Yes, the CFO is one of the positions who reports to the CEO. The CFO may often be a member of the board of directors, too.
Who can fire a CFO? ›
Normally, a CEO is the Chief Executive Officer and is the delegated representative of the Board of Directors for operating the business. As such, any employee, such as CFO, COO, CIO, etc., can be fired by the CEO.
How do you fight the CFO? ›
Battle. The CFO battle starts out by fighting a group of Cogs and Skelecogs, just like in the other Cog boss battles. The next stage is to defeat the CFO by throwing disabled goons (which are goons that come out of the CFO and need to be stomped on by other Toons) and safes at him.
Does the CFO rank under the CEO? ›
The COO is often referred to as a senior vice president. Chief Financial Officer (CFO): Also reporting directly to the CEO, the CFO is responsible for analyzing and reviewing financial data, reporting financial performance, preparing budgets, and monitoring expenditures and costs.
Who is more powerful than CEO? ›
In the corporate world, chairman vs. CEO roles hold significant importance. An executive chairman heads the board of directors, while a chief executive officer oversees day-to-day operations. The chairman's position is technically higher, managing the CEO and providing strategic direction to the board.
What position has more power than the CEO? ›
Since the board chairperson is superior to the CEO, the CEO has to get the board chairperson to approve any significant moves. While the board chairperson has the ultimate power over the CEO, the two typically discuss all issues and effectively co-lead the organization.
What is the highest position in a company? ›
In general, the chief executive officer (CEO) is considered the highest-ranking officer in a company, while the president is second in charge; however, in corporate governance and structure, several permutations can take shape, so the roles of both CEO and president may be different depending on the company.
