For years, boards, investors, and firms have said that people are a firm’s most important asset. Today, that claim is increasingly reflected in governance decisions, with boards routinely discussing workforce strategy alongside capital allocation, technology, and risk management. This shift reflects the rise of the knowledge economy and intensifying competition for skilled workers, the so-called “war for talent.” Yet for all the attention human capital receives, much of this discussion remains qualitative, with firms emphasizing culture, training, and engagement in ways that are difficult to compare across firms or tie to concrete governance choices.

This growing focus on human capital has elevated the role of the Chief Human Resource Officer (CHRO), who oversees employees. Not every firm has a CHRO, and even among those that do, the role varies widely in scope and influence. That said, over the past decade, CHROs have become increasingly common in firms and far more involved in strategic decisions, including large-scale reorganizations, culture initiatives, and succession planning. In many organizations, the CHRO now sits alongside the CFO and COO as a core member of the top management team, reflecting the growing belief that how firms manage people is central to long-run success.

At the same time, firms differ markedly in how they structure the CHRO role. In some companies, the CHRO is a strategic partner with meaningful authority and resources. In others, the role remains more administrative, even as firms publicly emphasize the importance of people and culture. This variation raises an important governance question: When is human capital management truly prioritized?

Our paper addresses this question by focusing on the CHRO pay ratio, defined as the CHRO’s total compensation relative to the CEO’s. This ratio reflects how firms allocate resources to the executive responsible for their human capital. (more…)