HRO Today December 2019 - 6

CEO's Letter
We Should Be Better
(If CEOs Would Only Join Us)
New HRO Today research reveals interesting fi ndings
on the gender pay gap for CHROs.
I hate to have to write this column. It is a confi rmation that we at HRO Today can be very smart and very dumb-
or perhaps just naïve. But, in either case, this is not a pleasant story to tell. A few months ago, we undertook a
comprehensive report on CHRO compensation. We have written about it before. The initial premise of the study was to
see if there was a correlation between CHRO compensation and a variety of business metrics. We examined the publicly
available data on 88 of the Fortune 500 chief HR offi cers (18 percent of the sample group that meets the criteria for
predictive statistical signifi cance). We also interviewed 60 CHROs for the report. We segmented the data using the same
methodology as the Fortune 50, Fortune 100, Fortune 200, and the full Fortune 500.
We looked at correlations in the data on overall revenue, market capitalization, and a host of earnings-related metrics
(earnings, EBITDA, and earnings per share). Armed with our charts, our graphs, and the purity of our research vision,
we dove deeply into the spreadsheets in search of what makes CHRO comp tick.
There is a strong correlation between earnings metrics, total compensation, and non-cash compensation or stock option
packages of the Fortune 50. The coeffi cient correlation for fellow members of the brotherhood of geeks was .79 for
total comp and .81 for non-cash compensation. Those are strong, but below the Fortune 50, the correlations fell apart.
So, while HR has benchmark data and justifi cation capability for virtually every other job in an organization, the CEO or
comp committee of the board does not use the same level of rigor. Most CHROs we spoke to said that after hire, they
frequently had to justify their comp plan as they would for all other executives.
In November, we presented the report at our HRO Today Forum in EMEA to a networking session of about 20 HR
directors (a title more common in Europe) and 15 other HR execs at the previous level. We were feeling pretty smart
that day about the correlation of the Fortune 50 and the alarming lack of correlation of the next 450 enterprises.
Among the attendees were a number of female CHROs, and one of them asked what we had observed with respect to
the gender pay gap. We were fl ummoxed or fl abbergasted or some other word that starts with fl ubbed. We had not even
considered the possibility that the executive tasked with eradicating the gender pay gap might actually be subject to one.
We went back and re-examined all of the gender-based data. And we discovered a difference in average pay between
the male CHRO cohort and the female CHRO cohort of over $200,000 per year and an " unexplainable " gap of 7 percent.
According the 2019 Payscale Report on Compensation, the gender pay gap between men and women of comparable skills
and education is about 2 percent. The gender pay gap for CHROs is 350 percent of the overall market pay gap.
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HRO TODAY MAGAZINE
| DECEMBER 2019

HRO Today December 2019

Table of Contents for the Digital Edition of HRO Today December 2019