By Zee Johnson and Larry Basinait
CHROs have worked their way up the executive ladder, solidifying themselves as being just as vital to organizational success as any other C-suite executive. Perhaps being at the forefront of worldly cataclysms can do that. Much like the evolving sentiment on HR executives’ importance, similar changes have been identified around their remuneration in HRO Today’s 2023 CHRO Compensation Study.
The recently released fourth edition of the report set out to see if the pay of chief human resources officers align with their overall duties. The analysis stems from publicly available data on the Fortune 1000, as well as data on 182 senior HR executives across the Fortune 100. Do CHROs feel equally compensated compared to the rest of the C-suite? What factor does gender play? What about diversity? The study sought to dive deeper into each of these pressing topics.
Further, it also looked at possible connections between senior HR executive compensation, company performance metrics, company size, and more. This data, paired with our network of executives and survey results from 2022 and 2020, produced influential findings.
One key finding that’s keeping pace with last year’s results is that women continue to outearn men—by more than $100,000 to be exact. And female CHROs don’t just have higher salaries, they also have higher total compensation. The pay gap closed slightly by 1.9%, though the numbers clearly show women still being favored in HR leadership.
One sentiment that’s gaining some ground over the past three years is how comparable respondents feel CHRO compensation is to the rest of the C-suite. More than half (53%) believe that compensation is in line with other C-suite members—the highest since the onset of the pandemic. That's a 12% increase from last year. Other HR executives also view that their company CHROs are fairly comped with 62% in agreement.
How do HR executives feel about departmental pay? Not great—only 22% believe it is fair, showing no movement from last year. A negative view of HR as a profession is reflected in a recent study from Sage that finds 95% of HR professionals feel their role requires a demanding amount of work and stress, leading to 81% feeling burned out. These sentiments are especially concerning considering the majority of HR practitioners do not feel compensated equitably to other departments. Since this sentiment is reoccurring, compensation has not yet been adjusted for the current demand of HR roles.
Does size matter? For executive pay, it seems that way with 78% of respondents believing larger organizations pay HR practitioners more than smaller companies. The study shows a ping pong movement with agreement—this year’s outcome is an increase from 2022’s 68%, but a drop from 83% in 2020.
When it comes to diversity, some companies have set out to increase their inclusion efforts as DEI positions within HR departments have quadrupled in the last five years. This could be why a recent report found that 53% of companies in the Fortune 500 have a chief diversity officer or equivalent and why our report revealed that 61% of survey respondents believed that there is representational diversity within HR leadership at their company, a 3% increase from last year. Adding to that, another 71% agreed that there was representational diversity within the HR department as a whole. Good news here! But when exploring minority compensation…the ball game is different.
There’s a trending drop in agreement when it comes minorities being compensated equitably: Only 62% of HR executives felt pay was fair this year among these groups. In 2020, 77% agreed and in 2022, it was still higher than 2023 at 72%. Looking at the HR department overall, only 62% agreed that minorities were compensated comparably to non-minorities. This is another steady drop—from 72% in 2022 and 77% in 2020. But these two aren’t the only decreases discovered by the report. Only 53% agreed that minorities in executive roles are compensated on par with other executives in their company, a nearly 20% drop from last year (70%).
In some cases, HR seems to be taking appropriate action to be inclusive from top to bottom. But looking further into the data of the 2023 CHRO Compensation Report, there’s much more work ahead for the department. Almost two-thirds (64%) of HR executives believe there’s representational diversity within the workforce. But this has dwindled by 14% over the course of three years. Another consideration: In the Fortune 1000, there were not enough African American CHROs to accurately compare compensation levels between ethnicities. Out of the 182 CHROs with publicly available compensation data, only eight were African Americans.
Exploring the How
Is there a universal deciding factor or methodology for determining CHRO compensation? The 2023 CHRO Compensation Report raised questions to seek correlations between salary, total cash compensation, and non-cash compensation.
According to the report, there were three company performance measures among the Fortune 50 that closely correlated with compensation, identifying a coefficient correlation of “1.0” as perfect, indicating that the two factors move with each other. All measures included: