In about 80% of nonprofit organizations, the highest-ranking paid staff person is the executive director. For most others, it’s the CEO or the president & CEO. In the charitable world, we often use these titles interchangeably, with little thought to the distinctions among them.
However, every year or two, some local charitable board begins contemplating a title change for its top staff person and asks me to comment on the differences. Although I’m no attorney, I’ve spent nearly 30 years working for foundations, dealing with many nonprofit leaders. Writing this column about the differences seemed like a useful reference for our community.
In many ways, the titles executive director, CEO, and president & CEO are interchangeable. To paraphrase Harry Truman, the buck really does stop with the person who holds this top job, regardless of the individual’s title. The distinctions among them, however, begin to emerge when you determine whether this highest-ranking staff person is also a principal officer of the corporation.
Per Wisconsin state statutes, “Principal Officers: Unless otherwise provided in the articles of incorporation or bylaws, a corporation shall have a president, a secretary, a treasurer and such other officers as are appointed by the board.” Therein is the first significant difference among the executive director, the CEO, and the president & CEO: All three are the highest-ranking executive, but only the president & CEO is defined in Wisconsin state statutes as a principal officer of the nonprofit corporation. Although the CEO is not defined in this statute, CEO means chief executive officer. One can assume that if an organization has a CEO, its board has likely imbued that position with the powers of a principal officer.
Conversely, the executive director is often not a principal officer of the corporation. Instead, it’s the head of the board that holds the title of president. In nonprofits with a CEO/president & CEO, the leader of the board is usually the board chair.
As a principal officer of the corporation, the CEO/president & CEO is typically empowered to execute documents and act on behalf of the corporation. The executive director does not normally have that authority unless it is explicitly granted to that individual in the corporation’s organizing documents or is so authorized by a resolution of the board.
When I joined the Door County Community Foundation in 2008, my predecessor held the title of executive director. At the time, we were just a few years removed from the scandals of Enron and WorldCom, during which the leaders of those companies falsified financial statements to cover up their fraud.
The primary reason that the Door County Community Foundation’s board named me president & CEO was because we handle a lot of money, and the board members wanted me to accept the responsibility of certifying the accuracy of our financial statements under the pains and penalties of perjury. That’s why my signature is on the federal and Wisconsin tax returns of the Door County Community Foundation.
If our financial statements have been manipulated to cover up malfeasance, I cannot claim ignorance because I’m the person who certified that our financial statements are true, correct and complete. In organizations with an executive director, it’s usually the leader of the board who signs the tax returns as its president.
Therein is perhaps the biggest differentiator between the uses of these titles: sheer size. The national search firm Scion Staffing notes that the title CEO/president & CEO is most common in charities with annual budgets of $5 million or more. In an organization such as the Door County Medical Center, with 595 full-time-equivalent employees, you’ll find it led by a president & CEO such as the talented Brian Stephens. Similarly, a charity with more than $17 million in contributions and complex financial statements such as the Door County Community Foundation is also led by a president & CEO.
Scion Staffing articulates another key difference: “Whether an organization requires a CEO or an executive director to lead their organization often depends on the culture of the nonprofit board, and if they themselves are setting the full mission, vision, values and strategy for the organization. The more strategic and visionary the needs of the role are, the more likely the role will be named as a nonprofit CEO.”
I know a couple of executive directors who really are CEOs. Over the last 30 years, I’ve also encountered a handful of CEOs who really should be executive directors. Regardless, my dream is that someday the Door County Community Foundation’s board of directors will finally give me the title I truly desire: “Big Kahuna.”
This article, written by Door County Community Foundation President and CEO Bret Bicoy, originally appeared in the Peninsula Pulse.