CEO instruction
Read more about what a CEO instruction involves, when it is used and how it affects corporate governance.
Explained – what is a CEO instruction and how does it relate to deputy CEO responsibilities?
A CEO instruction is a formal governance document adopted by the board of directors of a limited company (Sw: aktiebolag). It sets out the chief executive officer’s (CEO’s) responsibilities, authority and reporting obligations to the board. For companies that wish to ensure clear governance and division of responsibilities, it is often prudent to consult a commercial law adviser when drafting the document. The CEO instruction complements the articles of association and the board’s rules of procedure, and is used to clarify the respective roles within the executive leadership. Where a deputy CEO is appointed, the instruction should also delineate deputy CEO responsibilities and escalation routes.
When does a CEO instruction become relevant in the corporate governance framework?
The issue arises when a limited company appoints a CEO or when existing governance documents require review. The instruction is used to define decision-making mandates, levels of responsibility and information flows between the CEO and the board. It may also become relevant in connection with management changes, for example in ownership changes, mergers or expansion into new markets. In each case, aligning the CEO instruction with the corporate governance framework and the board governance structure is key.
Points to consider for a CEO instruction and deputy CEO responsibilities
When the board drafts or updates a CEO instruction, the document must be clear, up to date and tailored to the business. Below are central points to consider.
- Define which decisions the CEO may take independently and which require the board’s approval, with cross-references to the board rules of procedure.
- Describe reporting obligations, for example how frequently the CEO must submit financial reports to the board, preferably aligned with any board reporting templates.
- Regulate the division of responsibilities between the CEO, the board and any deputy or acting executives, including deputy CEO responsibilities.
- Ensure the instruction is consistent with the articles of association and any shareholders’ agreement, as well as relevant corporate governance policies.
- Set procedures for handling material deviations or risks in the business to support corporate governance transparency.
- Update the document upon organisational changes or new legal requirements to keep it coherent within the corporate governance framework.
A CEO instruction tailored to the company’s operations brings stability and clarity to decision-making, which strengthens trust between the board and executive management.
CEO instruction
Why is a CEO instruction important for the corporate governance framework?
The CEO instruction is a tool that creates structure in the company’s governance. It sets clear parameters for how the CEO must act within mandate and which decisions require board involvement. This reduces the risk of unauthorised decisions and ensures operations are conducted in accordance with applicable laws and internal rules.
For investors and owners, an up-to-date CEO instruction signals professional corporate governance. It contributes to transparency and effective communication between management and the board. It also protects both the CEO and the board by clarifying the division of responsibilities and reducing uncertainty around decision pathways.
A well-designed instruction can strengthen the company’s long-term development by bringing order to decision-making and clarifying who is responsible for what in the organisation.
Frequently asked questions on CEO instructions and deputy CEO responsibilities
A CEO instruction should describe, for example, the chief executive’s tasks, authority, reporting duties and responsibilities to the board, and where relevant, the scope of deputy CEO responsibilities.
A CEO instruction becomes relevant when the board appoints a CEO, particularly in private companies with a clear division between owners, the board and management. It is always recommended as part of the company’s governance documents.
The articles of association regulate the company’s basic structure under the Companies Act, whereas the CEO instruction is an internal document that sets out how management works in practice. Together, they provide a comprehensive basis for corporate governance in private companies.
If the CEO makes decisions beyond their authority, this may constitute an excess of powers which, in some cases, can lead to personal liability. Clarity and ongoing follow-up are therefore essential.
It should be reviewed at least annually or when the business undergoes major changes. This ensures the instruction always reflects current conditions and legal requirements.
To create coherent governance, the CEO instruction should be coordinated with:
- The articles of association
- The board’s rules of procedure
- Shareholders’ agreement
- Any corporate governance policies and compliance frameworks
Together, these documents form the company’s central framework for governance and responsibility. Not all companies will have every element; for example, a shareholders’ agreement is a matter for the owners. Appropriate board reporting templates can further support corporate governance transparency.
Contact
Contact us
If you prefer phone, please feel free to contact Felix Morling at +46 70 444 42 85
"*" indicates required fields