Who is the Top Dog: the Chief Executive Officer, the President or Chief Yahoo?

Nearly every day, it seems that some company creates a new C-level title. One list of C-level titles included over thirty-five titles, without mentioning "Chief Yahoo" or "Chief Wiki Officer." Even at the top of the corporate ladder, the list seems to be ever-increasing: Chairman, Chief Executive Officer, President, Managing Director, General Manager…. In part, because of the proliferation of titles, the founders of a new company may question whether they need or are required to have a particular position or an individual contracting with a company may be concerned about an individual's authority.

Whether a company is required to have a particular position depends in part on the type of entity. By statute, an Indiana corporation requires a single officer, whose sole statutory responsibilities are to prepare minutes of shareholder and director meetings and authenticate the corporation's records. Any other corporate officer positions must be set forth in the corporation's bylaws or established by the board of directors or officers. At the same time, limited liability companies and most other unincorporated entities may, but are not required to, have officers. The answer to the question "Who is the highest ranking officer?" actually depends on what your corporate bylaws say, or for a limited liability company (LLC), what your operating agreement says. You can define an officer's title and duties any way you want. In fact, to aid in marketing, it is not uncommon for companies to designate a group of officers that may be three or four tiers down the corporate hierarchy as "Vice President" or "Director." Nonetheless, you should be mindful of standard conventions in the corporate community, and concepts of apparent authority that attach to certain titles even when you do not intend them to have such authority.

For example, a general understanding has developed regarding the differences between the various positions at the top of the corporate ladder and their respective authority:

• Chairman/Chairwoman/Chair: typically leads the company's board of directors and chairs board meetings. The chairman may either be a full-time member of the company's executive management team with responsibility for day-to-day operations or a non-executive chairman who is independent of the company's management.

• Chief Executive Officer: today, the chief executive officer is typically the highest ranking executive officer with full responsibility for the activities of the company, including long-term strategy and day-to-day operations. In most instances, the chief executive officer has apparent authority to bind the corporation, even when acting without express authority from the board of directors.

• President: if a company does not have a chief executive officer, the president will be the highest ranking executive officer. If there is a chief executive officer, the president will typically focus on day-to-day operations.

• Managing Director: a common title in European companies, the managing director has a role similar to a chief executive officer.

• General Manager: historically, a general manager had more authority than a president and could act without specific board authority. Today, the title describes an officer with responsibility for managing both income and expenses.

Whether a company needs one or more of these positions depends upon its particular needs. Early on, a company may only need a president or chief executive officer, but as it grows, more than one person may be required. For example, there may be a desire to establish an independent board chairman to advise the chief executive officer or to emphasize board independence. At the same time, there may be a desire to separate day-to-day management and long-term strategic development by appointing a separate chief executive officer and president. The statutory requirements imposed on Indiana corporations and limited liability companies permit this flexibility by not requiring specific officer positions. So you have the flexibility to develop title names and authority to match your objectives. Microsoft developed the title "Chief Software Strategist" for Bill Gates, even though he passed the title "President and CEO" to others. But is there any real doubt who the top dog is at Microsoft?

Richard J. Thrapp is a partner and Anthony P. Aaron is an associate in Ice Miller's corporate mergers and acquisitions practice group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.