common grievance that human resources managers often share is that their
companies do not appreciate how their work contributes to their firms’ bottom
lines. That’s obviously not the case at Home Depot. With a $1.2 million increase
in total compensation, Dennis Donovan, the company’s executive vice president of
human resources, was the top-paid HR executive in 2004, up from second place in
2003.
Donovan is also one of 10 executives who were among the 30 highest-paid human
resources executives in both 2003 and 2004, according to a list compiled for
Workforce Management by Aon Consulting’s eComp Database. The list, which is
based on companies’ proxy filings with the Securities and Exchange Commission,
shows that eight of these 10 executives saw increases in their total
compensation in 2004.
"The good news for human resources practitioners is that in every discipline
their pay is moving up," says Joe Vocino, principal consultant in Mercer Human
Resource Consulting’s performance measurement and rewards practice. Particularly
given the added burden of Sarbanes-Oxley, human resources executives are crucial
to making sure that companies are staying in compliance, he says.
In a recent study conducted with the Society for Human Resource Management,
Mercer found that the top HR management executives with responsibilities for
labor relations saw their compensation jump 12 percent last year to $240,000.
"Human resources skills are definitely becoming more of a needed commodity,"
Vocino says.
The majority of the companies on the Workforce Management list are in the
technology or retail industries. It makes sense that these firms are the ones
that pay top dollar to their HR executives because these sectors place a strong
emphasis on the importance of people and their knowledge, says Doug Friske,
managing principal at Towers Perrin.
"In both retail and technology, people are a big cost or a big part of the
revenue equation," he says. Also, many of the executives on the list have titles
that include communications and compliance, which shows the direction in which
human resources jobs are moving, he says.
Human resources executives, like CEOs, are receiving more restricted stock
instead of just stock options. With the recent corporate scandals and changes in
accounting rules that require firms to expense their stock options as income,
more companies are moving toward offering restricted stock to their top
executives, says Charles Peck, compensation specialist at the Conference Board.
"This trend toward offering more restricted stock and paring down the number
of options granted to executives will continue in coming years as more companies
understand that there is no risk involved with offering restricted stock," says
Jack Dolmat-Connell, president and CEO at DolmatConnell & Partners, a Waltham,
Massachusetts-based compensation consulting firm.
One trend that is unique to human resources is that the number of women among
the top-paid executives has increased. Unlike in other top executive positions,
the number of women among the 30 highest-paid human resources executives doubled
in 2004, from three to six. "Given the high representation of women in the human
resources space, this is not surprising," says Peter Lupo, national compensation
practice leader at Aon Consulting.
Although human resources departments have taken a greater role in setting a
strategic course for their companies, analysts do not expect to see the number
of HR executives that are named among the five highest-paid executives at the
company to increase dramatically in coming years. Out of 5,573 proxies compiled
by Aon, only 195, or 3.5 percent, named human resources executives among their
top five highest-paid employees. Similarly, in 2003 only 3.3 percent did so.
With stricter regulation, general counsel and compliance executives will
often take one of those top five slots, Peck says. Friske, however, believes
that as more regulations are imposed on companies, the number that list their
human resources executives among their top five will increase. "There are a lot
of hot-button issues that human resources executives will be relied on to deal
with in coming years," he says.
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