CEOs are the leaders of organisations. They occupy the highest positions in companies. But what are they exposed to beyond meeting the challenges of their business? Jorge Toyama Miyagusuku from our Peruvian firm, Vinatea & Toyama, sets out his insights from a recent conversation with a CEO friend.
I have several colleagues and friends who are CEOs. Recently, one of them called me worried, so we had lunch together. He told me he felt alone within the organisation and that it's difficult to have friends or share concerns among his c-level colleagues. However, his biggest concern was the legal risks associated with his position.
With increasing frequency, I read news stories, rulings, social media posts etc. that highlight the increased responsibilities and pressures placed on CEOs. It was perhaps no surprise that my friend was having these concerns. Increasingly, regulations are establishing stricter parameters for CEOs. Stricter limitations, obligations, fines, and even administrative and criminal sanctions. Moreover, in some countries, CEOs are afforded less legal protection than regular employees.
The responsibility of a CEO
I began by explaining to my friend that the general obligations of CEOs relate to general verifications or validations of their compliance reports relating to their administrative, labour, tax, and environmental obligations. In these cases, the responsibility typically remains with the company as a whole, unless fraud or bad faith committed by executives, including the CEO, is proven. In those cases, fines, administrative sanctions, and even criminal consequences may result.
What concerned him most, however, were workplace accidents involving his employees or third-party personnel. There have been some specific cases where general managers have been held criminally responsible in this respect (in one case, a general manager was even sentenced to prison for a fatal accident involving a third party).
The general rule is that legal sanctions should apply to those who, by action or omission, have participated in unlawful acts. For example, a CEO will be liable if, due to cost concerns, they mandate an unsafe protocol that causes an accident involving an employee of an outsourcing company. On the other hand, if an act of corruption against a public official was approved by a line manager in violation of internal policies, completely unknown to the CEO, the sanctions should exclude them.
I also explained to him how a significant consideration must be risk management and compliance. Every company must have a matrix of actual and potential risks, with strategies to manage, mitigate, or eliminate legal, operational, and financial risks. A key aspect for the optimal functioning of this matrix is the clear definition of job responsibilities and roles (e.g. in job profiles, employment contracts, job descriptions etc.), with clear deadlines and goals. If a CEO can implement these within the organisation, with the help of their c-suite colleagues, then some of the concerns set out above can be minimised.
What did I suggest to my CEO friend?
Towards the end of the lunch, rather than continuing to focus on the legal aspects, I shared three suggestions for achieving distinctive management that can help leave a meaningful legacy. Coincidentally, these guidelines can also help to significantly reduce a CEO's risk exposure.
First, and above all, be a good person, with genuine humility. A lot of it. A CEO must treat everyone as they would like to be treated. Leadership is achieved through the respect and commitment generated in others, not through statutes or hierarchies that recognise one's authority.
Second, surround yourself with the best managers and professionals. C-level managers and key professionals must be better than the CEO in their specific areas of expertise. A high-performing team asks questions with sound reasoning, possesses developed soft skills and a clear strategic vision with the ability to execute, and prevents costly mistakes and unnecessary risks.
Third, inspire others with your leadership. Most of the best employees rely on leaders who motivate them, who transform them into better professionals, but above all, better people. Let's remember that the first reason for attracting and retaining talent begins with a CEO who genuinely cares about the overall well-being of the entire organisation, based on a culture of respect and trust.
Takeaway for employers
CEOs often enjoy enhanced working conditions and attractive compensation and benefits packages, typically tied to goals and company results. However, being a CEO also involves dealing with significant challenges, in an environment that is becoming increasingly difficult to operate within.
Nevertheless, as I explored with my friend, CEOs have a unique opportunity to inspire their team, positively impact lives, and transcend company statistics and figures.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
