Business, Legal & Accounting Glossary
The Chief Operating Officer (COO) is a company executive, usually a second in command responsible for day-to-day operations.
A chief operating officer is an executive who is responsible for the day-to-day operations of a company. The chief operating officer reports directly to the chief executive officer (CEO). Companies typically hire a chief operating officer after a certain amount of growth and when the CEO becomes too busy with strategic issues to be involved in daily business decisions. The chief operating officer focuses on operations management, such as the order fulfillment process, quality control, manufacturing, and human resources functions. The chief operating officer often does not manage sales, marketing, or public relations. In some companies, the chief operating officer is also its president; in others, the chief operating officer is an executive or senior vice president. Typically, startups or small businesses do not employ full-time chief operating officers for financial and practical reasons. It is important to first understand how a chief operating officer would contribute to the business in the context of a company’s size and scale.
The COO oversees the day-to-day operations of the company in accordance with the direction provided by the board of directors and the Chief Executive Officer (CEO). If the company makes soap, the COO is in charge of seeing that this is done efficiently and that improvements are made.
The COO could also be the top person in the marketing and personnel departments. Job duties can vary by the size and needs of the company. Smaller companies might need a more hands-on COO or might not even have someone with this title.
Organizational charts can vary, but usually, the Chief Operating Officer reports to the CEO, who reports to the Board of Directors and specifically the Chairman of the Board. In most companies, the CEO and COO divide responsibilities, with the CEO taking on external responsibilities such as acting as spokesperson for the company with the press and the investment community, while the COO takes care of the day-to-day internal operations of the company.
As with other top executives, potential investors should check SEC filings including form DEF 14A or company documents/proxy statements to find out how much the COO is paid and whether that pay is tied to performance. Executives with compensation that rises with good performance have more incentive to make the company succeed. Are the executives’ interests aligned with shareholders? Compensation can include salary, benefits, bonuses, and stock options. Look to see how your COO’s compensation compares to others in the same industry.
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This glossary post was last updated: 4th August, 2021 | 1 Views.