Humans are more than an asset

CEOs say talent is their most valuable asset, yet HR leaders hold just 8% of Fortune 500 board seats

October 31, 2023

Good morning! Fortune senior writer Lila MacLellan wrote today’s CHRO Daily, which first appeared in sister newsletter Modern Board. Sign up for that newsletter here. CEOs are fond of saying that people are their company’s most important asset. But most corporate boards of public companies—while rich with finance wizards and strategy masters—have declined to bring on people experts, like chief human resources officers.? That’s an absurd situation for Dan Kaplan, senior client partner for the CHRO practice at Korn Ferry, a leadership advisory firm. Kaplan has been pushing for more boards to embrace CHROs for nearly two decades. In a former role at a different company, he started an institute that sought to place more HR leaders on corporate boards and now runs “a smaller effort” with the same goal at Korn Ferry. He’s not alone—Kaplan joins a chorus of voices who say that because human capital management has become a top and fraught?board-level issue, more boards should have directors?with an HR background.? Equilar, a data research firm, wrote last month that CHROs are “attuned to the risks associated with human capital, such as talent shortages, workforce disruptions, and employee relations issues.” The consulting firm KPMG?also notes?that board members with an HR background can provide unique insights into CEO succession planning,?diversity and inclusion?efforts, and a host of other talent issues.? Kaplan adds that it’s a CHRO’s job to speak truth to power, a skill?too often missing?among directors. In a senior leadership team, he says, “they should be the one person telling the CEO when the emperor has no clothes.”? “At their best,” he adds, “they are consiglieres, and they give excellent advice.”? While the role of the CHRO has transformed over the past few years with?bigger pay packages?and a?viable path to the corner office,?the CHRO’s leap to the board level hasn’t yet manifested as a full-blown trend, at least not at public companies.? In 2019,?Kaplan coauthored an article estimating?fewer than 3% of board directors at Fortune 1,000 companies were former or current HR executives. The consultancy Semler Brosseyrecently found that about 8% of S&P 500 boards include a current or former CHRO. Kaplan estimates that fewer than 40 HR leaders serve as directors at Fortune 500 firms. The reasons that change has been slow have to do with both the supply of CHROs in the market and the demand for them from sitting directors, Kaplan suggests, saying that although there are hundreds of top-caliber HR executives, there still aren’t enough to give the profession the same caché as other roles. At the same time, many sitting board members are CEOs from an era when HR leaders rarely dazzled. When a firm like Korn Ferry recommends a people leader as a board candidate, the pushback may be, “I was CEO for 40 years and never had a good HR leader,” says Kaplan. “It’s an outdated perspective,” he adds. Lila MacLellan [email protected] @lilamaclellan

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