Hiring a CEO

When the board appoints a CEO they should give them:

  • a letter of appointment and contract saying the terms and conditions of their employment
  • a copy of their position description
  • any policies that set out the CEO’s delegations and authority
  • clear performance expectations.

If you decide to employ a CEO, make sure you know your responsibilities under workplace relations laws. 

Matters to be aware of when appointing a CEO

The appointment of a CEO should be done with a proper and transparent recruitment process. This helps ensure the recruitment process is competitive and the corporation can find a CEO who is a good fit. The CEO role should be advertised and the board should consider whether it would be appropriate to use a recruitment agency to find the most appropriate candidate for the role. 

Appointing a CEO who is related to a director creates a conflict of interest. The director who is related to the CEO should not be involved in the decision to appoint or remove the CEO. 

Before appointing a CEO, boards need to make sure the person they are appointing has the appropriate skills and experience. A good way to confirm this is by checking the person’s references. 

Boards must ensure that CEOs have contracts that clearly set out their employment terms and conditions. Contracts should specify bonus payments, time off in lieu eligibility, annual leave loading, entitlements such as the use of a motor vehicle. 

It is better practice for CEO contracts to be tabled at a directors’ meeting so that all of the directors are aware of the CEO’s employment terms and conditions. These terms and conditions should be agreed by the board before being offered to the CEO.

Directors need to make sure the remuneration of the CEO is appropriate and any future pay increments, bonuses and termination payouts are fair and not excessive. This is to protect the interests of the corporation and its members.

For more information visit the Fair Work Ombudsman website.

The directors must stay well-informed so they can make strategic decisions. That means the need to keep an eye on their CEO's work. But the CEO needs to be trusted to make operational decisions.

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