Many firms are placing increasing importance on certain functions within their organization, elevating many to the “chief” role, for example, Chief Technology Officer or Chief Marketing Officer. It is rare for the Chief Human Resources Officer (CHRO) to be among the proxy-disclosed executives. Using data provided by Main Data Group, we took a deeper look at this role to understand whether there are common characteristics that make certain CHROs more likely to be elevated to the named executive officer (NEO) group and, once they get to the group, how they are compensated.
Among the 256 public companies with a proxy-disclosed CHRO we found:
- About 2/3 had only the HR function in their title. The remainder included more than one functional role in their job title. Most often, additional responsibilities included legal, compliance and risk, IT, marketing/communications, and administration.
- The vast majority come from small and medium-sized companies with less than $5B in annual revenues. Of this group, nearly half were concentrated among companies with less than $1B in revenues. We were not surprised with this result given that senior executives at smaller companies can assume more than one functional role.
- Most come from the industrials and consumer discretionary sectors. While the data does not provide insight, we sense that companies with “people-intensive” businesses may put a greater value on the human resources role, particularly when labor unions may be a factor.
- Regardless of company size or industry, disclosed CHROs share remarkably similar tenure and age characteristics. Average tenure runs about ten years with an average age of around 55.
We also reviewed compensation levels disclosed in proxy statements versus general industry executive compensation surveys and found that proxy-disclosed CHROs can earn substantially more than their counterparts (120-150%). Further, we found that disclosed CHROs’ pay mix and compensation structure are aligned with the prevalent market pay practices for other NEOs.
Almost all CHROs attend compensation committee meetings on a regular basis, yet only a small percentage become NEOs. There are a few factors that can influence whether an individual CHRO becomes an NEO and if this becomes a trend for more companies over time. CHROs have leadership development, succession planning, and recruitment responsibilities and these responsibilities are becoming increasingly high-profile in a world that demands strong corporate governance. And, most importantly, when a CHRO goes beyond supporting strategy and exhibits the talent and insight to participate, influence, and develop strategy, they may get the nod to ascend to the NEO group.
The complete report, "Chief Human Resources Officer: Proxy-Disclosed Pay Practices" is availalbe at www.maindatagroup.com.
