HR executives have been toiling in the background of corporate America for decades, overseeing employee recruitment, monitoring retention, and generally managing workplace culture. But after years of playing second fiddle, CHROs are poised to become a major player in the C-suite, according to Stanford economist and workplace guru Nick Bloom.  

About 13% of S&P1500 companies had an HR leader among their top five paid C-suite positions in 2022, according to a recent analysis from Bloom and co-author Mert Akan, a research fellow. That’s a dramatic increase from around .5% of CHROs who were among the top five highest paid executives in 1992. Bloom tells Fortune that’s a clear indication that HR executives are climbing the corporate ladder.

“Over the last 30 years, what we’ve seen is a huge increase in HR importance in the firm, and our proxy for that is the number of HR execs in the top five positions,” Bloom says. “I went to look at the data, being aware of this from so many individual conversations, that wow, it’s very clear that HR is rising up the ranks.”

In 2022, CHROs earned around 70% relative to other executives’ compensation, excluding the CEO. For comparison, CHROs earned about 40% relative to non-CEO executive pay in 1992, according to Bloom’s analysis. Over the past few decades, he found that the wage gap between the CEO vs. all other C-suite executives has closed by half—and the ratio of salaries, bonuses, and stocks for HR leaders have increased. That’s in line with a Fortune analysis from last year of S&P 500 companies that found other executive positions have gained ground on CEO pay, including median compensation for HR chiefs.   

“There’s been a big increase in demand for high-quality HR folks and you’ve seen their numbers rising, and at the same time the pay gap has been closing,” Bloom says.

However, HR’s pay and prominence isn’t rising equally across all industries. Only 8% of companies in information services, like technology, have HR executives crack the top five most compensated employees, according to Bloom’s analysis. Among financial firms, that number drops to 5%. In sectors like leisure and hospitality, whose figures stand at 25% and 23% respectively.

“Finance and tech don’t have a particularly high representation of HR in the exec suite. That’s kind of surprising, particularly for tech, because talent is pretty critical,” Bloom says. On the other hand, he explains the service industry employs more workers who are spread out across various regions, which puts more responsibility on the HR function. “It turns out a lot of it’s actually retail, food, service companies with massive payroll and therefore very complicated operations.”

Other factors that signal how critical the HR function is becoming for businesses, according to Bloom: companies have phased out older, less senior-sounding names like “HR director” and “people director” for executive titles like CHRO and CPO, or chief people officer. And the role has grown to oversee new duties beyond payroll and hiring, like DEI, real estate, and the ongoing WFH saga. “They’re topics that have the CEO’s attention,” Bloom says, 

He expects HR leaders to increasingly become cross-functional experts, setting them up for more power and bigger paychecks in the future.

“Companies don’t turn on a dime. And so I’d feel very confident to say this process will continue for the next five years, he says. “I can just see it becoming more and more important.”

Emma Burleigh
emma.burleigh@fortune.com

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