Is the Term CEO Overused in the Age of Startups?

The term CEO (Chief Executive Officer) is ubiquitous in the world of startups. Many tech companies today have a CEO, yet the team often comprises just a handful of people. This article explores whether the title 'CEO' is overused or misused, and provides insights from a seasoned professional.

The Necessity of the CEO Title in Startups

Adam Gering, a tech entrepreneur, contends that in tech startups, the CEO title is essential for securing venture capital and maintaining a structured management hierarchy. When seeking funding, startups must be organized as a C Corporation, which requires the appointment of a CEO for corporate governance.

For startups, the CEO is crucial for employee recruitment. Senior candidates want to know to whom they will be reporting, and more often than not, this will be the CEO. Investors also seek clarity on the CEO's role before determining whether to meet with the company. This transparency is vital for establishing credibility and trust.

The Distinction Between Real CEOs and Wannabe CEOs

The overuse of the CEO title is more prevalent in start-ups and emerging ventures where the idea of fame and fortune is highly romanticized. However, this does not mean the title is abused in all contexts. Several factors differentiate a 'real' CEO from a 'wannabe' CEO.

A 'wannabe CEO' often claims the title based on personal attributes such as financial investment, being the first to have an idea, or other irrelevant factors. This behavior can be seen as imitating others in an attempt to create an illusion of legitimacy. In reality, this misuse of the title can lead to confusion and lack of credibility.

A 'real' CEO is typically hired by a Board of Directors, whose members are independently successful and have no financial stake in the company. The board seeks a CEO who will serve the interests of the stockholders and whom they can remove if necessary. In contrast, in 'wannabe' companies, the same individuals often serve as both the board and the management, conflicting interests that can cloud judgment.

The Role of Government and Agencies

Government agencies and similar organizations often require a formal title when signing documents. In such cases, the CEO title is used to meet these requirements. In certain contexts, the CEO title is seen as a formality, such as when simple disagreements arise within the company's management.

For example, in my own experience, the CEO title is used to satisfy such requirements, and my partner has no objection to this. However, in the day-to-day operations of the company, we often debate and argue until we reach a mutual decision. We acknowledge that a conflict of interest is always present and strive to resolve it through mutual consent, not by invoking the CEO title.

Conclusion

The term CEO is not overused simply because each company can have only one. However, it can and often is misused, especially in the context of startups where individuals may unjustifiably claim the title to enhance their perceived legitimacy.

Ultimately, the true value of the CEO title lies in the context of the organization. In well-established companies, the CEO title is a necessary legal function for proper governance. In startups, it may be seen as a form of self-signification, much like playing house.