KH friends are certainly familiar with the terms CEO and director in a Limited Liability Company (PT)? CEO stands for “Chief Executive Officer” which literally means “Chief Executive Officer”. The CEO is the highest position in a company’s management hierarchy, usually in startups. A CEO is the individual responsible for the overall management of the company and exercises ultimate executive authority. CEO and director are two positions given to individuals with the most senior roles in a company’s organizational structure. While both are leaders, CEOs and directors are two distinct positions. So, what are the differences between a CEO and a director in a PT? Let’s take a look at the full explanation below!
What are CEO and Director in a PT?
In order to better understand the difference between CEO and director, of course, KH Pals need to know first the definition of each. This is because CEO itself is often misunderstood as president director or managing director, even though the two are clearly different. The CEO in a company plays a role in encouraging his team to achieve success. But how? It’s the CEO’s job to think of the best ways and motivate the team to be on the same page in achieving the company’s common goals. Directors, on the other hand, are heavily involved in the day-to-day operations of the company and deal directly with employees. Directors actually get their orders from the CEO. That said, the CEO is the conceptualizer while the director is the executor. Directors are also accountable to the shareholders. However, in Indonesia, the CEO and director can be held by the same person. Sometimes, too, CEO and director are just a matter of designation. For example, in corporate companies the main leader is called a director, while in startups it is called a CEO. so, it all goes back to each company.
Differences in Legal Basis of CEO and Director
Although often considered the same and held by the same person, in general, in the context of Indonesian law, the term CEO itself is not explicitly known or recognized. Information on the role of CEO is also not included in Indonesian laws, such as Law No. 40/2007 on Limited Liability Companies (PT Law). In the book Top CEO, Rich Salesman written by Heru Setyaka, it is explained that CEO is the most senior position in a company. The main task of a CEO is to lead the company and maintain its stability. Unlike the CEO, directors are legally regulated in the PT Law with the term “directors”. Where according to Article 1 of the PT Law, the board of directors is an organ of the company that is authorized and fully responsible for the management of the company for the benefit of the company, in accordance with the aims and objectives of the company and represents the company, both inside and outside the court in accordance with the provisions of the articles of association.
Differences in Roles and Responsibilities of CEOs and Directors
The second difference between CEOs and Directors lies in their roles and responsibilities. CEOs are the chief executives of the company who are responsible for the overall operational management of the company. They focus on business strategy, strategic decision-making, and implementation of the company’s long-term plans. Meanwhile, directors have responsibilities in making important company decisions as described in Article 100 of the PT Law, namely:
- Preparing shareholders register, special register, minutes of General Meeting of Shareholders (GMS), and minutes of board of directors meetings.
- Prepare the company’s annual report and financial documents. The Board of Directors has the responsibility to prepare the company’s annual report, which includes information on the company’s finances, performance and position.
- Maintain all registers, minutes, and financial documents of the company. The Board of Directors must keep and maintain all documents related to the company’s activities, including the register of shareholders, minutes of meetings, and financial documents.
Shareholding Differences between CEO and Director
While the CEO may own shares of the company, the CEO position is not necessarily linked to share ownership. The CEO may be an employee appointed by the board of directors and shareholders to lead the company. Directors, on the other hand, are generally individuals elected by the company’s shareholders. They may be shareholders or represent certain shareholders on the board of directors. To provide additional information, the definition of CEO is also listed in Black’s Law Dictionary 9th which reads: “A corporation’s highest-ranking administrator, who manages the firm day by day and reports to the board of directors.”
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As such, the term CEO does not always specifically refer to the president or managing director, but can also be used to refer to the head of the office responsible for the administration and personnel of the company.
KH Contact
How, now of course KH Friend has a better understanding, right, the meaning and differences between CEO and director in a PT? Or are you still confused about the provisions governing both of them, their roles and responsibilities, and their appointment? Relax, so you don’t get confused, just consult with Kontrak Hukum! As a digital legal platform, we can help you to take care of all needs related to PT, from establishment, legality fulfillment, to director appointment and other consultations. For more information about PT services, please visit the KH Services – PT page. Or if you have questions about companies or other businesses, you can contact us at Tanya KH or send a direct message (DM) to Instagram social media @kontrahukum.
