The CEO in Law and in Practice: a study of categorisation and control

Abstract

The purpose of this work is to draw upon empirical evidence supporting concerns over the perception and reality of the power and control exercised by chief executive officers (CEO). It provides a focus on the role of the CEO (the “clout” title) and provides an analysis of the legal framework within which that role is both recognised and controlled. It also tests the assertion that “the law has not fully come to terms with the variety of management structures and practices in modern companies – including terminology” (Farrar’s Company Law 1998).The paper begins by examining the existence in law of the position and power of the CEO. In doing so, the study draws upon the applied and developed principles of agency, attribution and alter ego theories, and the concept of controlling minds in an attempt to provide a category of definition, albeit one of negative recognition and the implications that that might have in developing effective legal controls.Control is then examined in the context of both theory and practice. Practice is based upon the study of 150 listed companies. It builds upon the earlier research undertaken by Franks et al. (1999) and looked to examine the relationship between CEO and executive board turnover and corporate performance, ownership and structure. It seeks to provide some information in terms of a relationship for both recognition and control of CEOs. It identifies categories of “controllers” and categories of “definition” in an attempt to present a contemporary legal framework for recognition and control.