CHRO Content Series: How Common Are CHROs Among the Highest-Paid Executives?

March 31, 2022

Samar Feghhi

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As the focus on company culture, human capital and diversity initiatives grows, so too has the role of the chief human resources officer (CHRO). Forbes details this evolution, emphasizing that modern CHROs now hold a more strategic role and are relied upon as a “liaison between the CEO and the workforce.” The CHRO is no longer a transactional and administrative role, but rather a voice for employees within the C-suite that can help steer companies through the ever-changing corporate climate.

Figure 1: The Prevalence of CHROs as Named Executive Officers (Russell 3000)

According to an Equilar analysis of the past three years, the prevalence of companies in the Russell 3000 that have a CHRO as a top five named executive officer (NEO) is slowly increasing. A 1.1 percentage point jump from 2019 to 2021, though small, showcases that more companies are recognizing the necessity of a human resources function within their C-suite. As a result, HR leaders are finding themselves progressing into top-paid, C-level executive positions. Furthermore, examining the gender breakdown of CHROs, as their prevalence among NEOs rises, could be a predictor for the C-suite.

Figure 2: The Percentage of CHROs by Gender (Russell 3000)

The prevalence of female CHROs within the Russell 3000 has risen steadily by around two percentage points each year since 2019. The CHRO role has historically been dominated by women, but has not been a common path to other C-suite positions. In 2015, Harvard Business Review cited that CEOs ranked HR as the eighth or ninth most important function, and in 2019 Gallup similarly stated that CHROs are the least likely to become CEO of an organization.

The limited access CHROs have to other roles could change as their responsibilities become more crucial to a company’s success. This is visible through the growing focus on human capital management and the role CHROs play in leading these efforts. A recent article by Forbes emphasized that human capital has become a company’s greatest asset, making CHROs an essential part of leadership as they “work closely with CEOs and boards” to spearhead employee retention and attraction. This trend became further apparent during the course of the COVID-19 pandemic, when the focus on employees and talent became exacerbated. Additionally, the current War on Talent and Great Resignation are also factors contributing to the demand for exceptional people leadership.

With CHROs responsible for managing an increasingly vital resource, it is clear that they are becoming an indispensable and strategic part of leadership. The growing influence and prevalence of CHROs could mean new opportunities, and consequently, greater female representation across the C-suite.

Analyzing changes in CHRO compensation provides another lens into this shifting landscape.

Figure 3: Median CHRO Total Compensation (Russell 3000)

Figure 4: Median CHRO Total Compensation (Russell 1000 and 2000)

Figure 3 shows median pay for Russell 3000 CHROs increased by 9.5%, from $1.3 million in 2019 to $1.5 million in 2021. Despite the slight drop in pay in 2020, which could be attributed to the adverse effects of COVID-19, the overall increase in median pay highlights that companies are beginning to compensate CHROs in line with their more complex, strategic responsibilities.

Figure 4’s breakdown of compensation between the Russell 1000 (top 1000 companies) and Russell 2000 (bottom 2000 companies) also provides interesting insights. CHRO compensation for the smallest 2000 companies of the Russell 3000 increased, while CHRO compensation for the top 1000 Russell 3000 companies declined. Examining the two figures together emphasizes the overpowering effect that Russell 2000 companies had on the increase in median compensation across the Russell 3000. Smaller companies may be recognizing the need for CHROs and allocating more resources towards the position than prior years. As for larger companies, it is less clear why they reduced their CHRO pay and if COVID-19 was a major factor. Monitoring whether Russell 1000 pay continues to decline, as the CHRO role evolves, may prove interesting.

It is difficult to dispute that the value CHROs bring to the C-suite is changing. Newfound strategic responsibilities and close collaboration with other members of leadership have shaped what it means to be a modern CHRO. As companies face mounting pressure to keep up with societal changes and navigate the challenges brought upon by the pandemic, CHROs will continue to play a key role as integral members of the C-suite.

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