Increasingly often, chairs of boards of managing directors in our country call themselves ‘CEO’, Chief Executive Officer. If, in addition to this CEO, there is also a managing director with a financial background (the ‘financial director’), then this soon becomes the ‘CFO’, the Chief Financial Officer. This terminology originated in the United States.
There is, as the chair of a board of managing directors, nothing wrong with calling yourself a CEO. However, it can lead to confusion. A CEO in the United States has a different statutory position than the chair of the board of managing directors in our governance system. Simply put, the CEO in the United States has more power than other board members. Not with us.
In our system, the law stipulates that the board of directors is collegiate. This means that all board members are in principle equal. ‘In principle’ because the articles of incorporation may provide otherwise. However, this hardly ever happens. It is true that one of the board members can be appointed as the chair, but this person has no more managerial authority or capacity than any of the other board members.
The law presumes the board of directors to be a unit. This means, for example, that the vote of the chair is not decisive in the event of a tie (unless this has been literally stipulated in the articles of incorporation). It also means that the chair of the board of directors cannot give instructions to their fellow board members. These fellow board members do not have to accept any instructions from the ‘CEO’. Nor can the chair of the board of directors adopt resolutions on behalf of the board without the other board members being aware of them and having taken part in the decision-making process. Such a unilaterally adopted resolution by the CEO is not a valid board resolution. It is null and void. So, in an organization there is simply no such thing as ‘one captain on the ship’. Unless there is only one board member, the board members are joint captains.
One of the consequences of this collective responsibility is a collective liability for a board resolution. In principle, board members are even jointly liable for unlawful acts committed by another board member in that capacity without their personal involvement.
Also originating from the United States is the ‘Chairman’, the chair of the supervisory board. The United States has a so-called monistic management model. This involves only one administrative body, the ‘board’. This body combines both executive and supervisory responsibilities. That board has a number of executive board members, with the CEO at the head, and a number of supervisory board members. The chair of this one board is the Chairman. So, they have a lot of power. In the US, it can even happen that someone can call themselves CEO and Chair at the same time. The person in question is then both the chair of the executive board and of the board as such. In our legal system this is impossible. In our system, the chair of the board is (only) the chair of the executive board. The chair of the supervisory board is (only) the chair of the supervisory body. Each has a separate and entirely different responsibility.
In our system, there is no hierarchical relationship between the supervisory board and the executive board. The chair of the supervisory board has no special say on their board, nor on the executive board. They have no more say than the other supervisory directors. Their chairmanship is also functional. They must ensure that the board functions properly. Nothing more and nothing less.
There is absolutely nothing against the chair of a supervisory board being called the ‘chair’ or the chair of the board of directors being called the ‘CEO’. However, it is very important that all those involved, both fellow board members and supervisory directors, are aware that this term or designation has no special meaning whatsoever. A pity because it does sound nice and impressive: CEO.