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Elevating Conversation Beyond Compensation and Succession

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By: Keith Meyer & Larry Krema
Traditionally, a board of directors selects a company’s CEO and provides oversight of the preparation of corporate financial statements, development of strategic plans, and related M&A (mergers and acquisitions) activity. Boards are now becoming more engaged in setting the right tone at the top on the key “soft issues” — culture, employee engagement, and leading-edge diversity and inclusion practices. In effect, elevating these critical human capital conversations to the board level. And, as a result, boards should be calling on the CHRO for more than just the traditional input on executive compensation and CEO succession.

The good news is that, according to the results of a pulse survey we conducted among HRMAC members, 75 percent of CHROs are being called upon to participate in critical boardroom conversations. Boards are spending more time consulting with human resources experts, including CHROs, who can contribute their expertise not only in the areas of compensation and succession but also corporate culture, employee engagement and diversity-related priorities. All of these issues have an impact on how a company manages risk, drives organizational success and improves its reputation in the market.

Culture may not be seen as directly linked to the other areas a board oversees, but an organization’s leadership sets the culture — and culture permeates all facets of a company and its success. Culture drives the daily relationships between employees, as well as how those employees interact with clients, customers and the communities they serve. All culture issues are people issues at their core, and company culture is often one of the first things an interviewee asks about when considering a role with an organization. It can strongly influence a company’s reputation and people’s willingness to work for, or with, said company. Today, many boards are starting to recognize the impact of culture and are adjusting the focus of the typical compensation committee and, more broadly, the board as a whole to address culture-related issues.

Additionally, while a board may look to its audit committee to analyze number patterns and discern why revenue may be trending down quarter-over-quarter, having a CHRO on that committee can help uncover non-financial reasons for performance. The CHRO can help the board understand the role of employee engagement in a decline in sales. Including the CHRO in broader business issues at the board level also has the potential to increase both the organization’s efficiency and its effectiveness when it comes to how it manages its workforce, leading to improved results.

An emerging aspect of board responsibility is to ensure an organization has proactive and forward-thinking diversity practices, which cover areas such as wellness, mental health and social movements like #MeToo or TIME’S UP (#TimesUp). This is yet another opportunity for CHROs to engage and influence at the board level in a more strategic way. Boards are now waking up to how important these issues are in preparing effective, preventative risk-management programs, much as they consider other critical exposure areas — from technology to data privacy and operational hazards. CHROs have the experience and interaction across organizations, and have the advantage of a unique perspective, to be able to identify potential risks.

Conclusion

CHROs are spending more time in the boardroom, which is an opportunity for HR leaders to expand their influence and participation, and engage on issues like corporate environment, ethics/integrity, employee engagement and risk. There is no other individual in the C-suite more uniquely positioned to evaluate, assess and influence than the CHRO on many strategically important issues that ultimately link back to leadership and corporate performance.

Meyer and Krema spoke at the March 5 CHRO Roundtable event on “Leveraging the CHRO Role on External Boards.” Learn more about CHRO Roundtables here.

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