What does the CEO actually do?

I recently read two interesting articles. The first was a summary of survey results produced by Execunet, who asked their members his question: “If we had to boil things down to just one critical function, what is the CEO’s primary role?”  The answers varied from “increasing shareholder value” to “effectively communicating a vision”.  

The second article was an interview in the Weekend Financial Review (November, 10, 2012) with the person anointed by the Australian Shareholders’ Association as Australia’s best CEO, medical product company CSL’s Bryan McNamee.  In 1990, CSL had a market capitalisation of $23 million and 33-year-old McNamee was appointed the CEO.  Twenty-two years later, CSL has a market capitalisation of $23 billion and over the past 10 years the annual compound growth in net earnings has been 29%.

However, McNamee maintains that too many CEOs focus on the scoreboard and that is where they stumble.  Instead he believes his success was the result of a continuous cycle of company “reinvention”, combined with a focus on recruiting the best staff and advisors.  He also said that CSL’s technical complexity worked in his favour.  While many armchair experts could claim they could run Qantas or Fairfax brilliantly, few would say the same about CSL.  McNamee’s leadership was free of the “second-guessing” that occurs so frequently with large listed companies.

Another CEO who I have heard speak, Rob Murray, chief executive of Lion Nathan National Foods, said the most important role of the CEO was to improve the culture of the organisation via both his attitude (CEO being the leader of leaders) and by his actions. I tend to side with Murray, but I would add one caveat.  Yes, the CEO defines the culture and sets the rules, but the CEO is also the one person that can break them.

What happens in any organisation is the unforseen circumstance where the rules need to be broken.  You cannot have just anyone in the organisation breaking the rules because the result would be corporate anarchy.  But you need to have one person anointed as the rule-breaker, and that must be the CEO.

My favourite example of this process in action in is the executive pardon for the crime of murder –the forgiveness of a crime and cancellation of the penalty for it – a power that is typically held by the highest political leader of a country. Each case needs to be judged on its merits. However, for the process to work you can only have one person with the right to commute a sentence. And that is the process that most successful governments have chosen.