I've seen the CTO report to the VP of Eng and I think it was exactly this. They were essentially the chief architect. VP of Eng handled talent and strategy. It was essentially a transition for the CTO who just didn't like the people side of it but was a baller at the technical side of it so they went from reporting to CEO to VP. It seemed to work out very well.
I imagine it only works if you have a CTO who's doesn't let the change in reporting structure bother them (i.e. someone who isn't egotistical or vain).
To avoid the problems mentioned above. If VP Eng reports to the CTO the CTO has ultimate authority over his decisions, which is problematic when the reason you're hiring the VP Eng is because the CTO lacks the skillset to effectively manage the engineering organization.
VP Eng and CTO should be peer positions both reporting up to the CEO. The VP Eng's job is to keep the company's existing product working and maximize its value to the market. The CTO's job is to search for new potential technical developments or market opportunities that could alter the company's strategy. They need to report directly to the CEO as well to ensure that information flow doesn't get impeded by a VP Eng more focused on what the world looks like now than what it'll look like in the future.
