New HR Policy Chair Pam Kimmet Ushers in Association’s Second Half-Century: “There Is an Expectation That Our Companies Play a Stronger Role”
Celebrating its 50th anniversary at its annual CHRO Summit, the Association elected Pam Kimmet, Chief Human Resources Officer, Cardinal Health, Inc., as our new Chair. Ms. Kimmet's tenure begins as a turbulent political landscape imposes new expectations on the role large companies play in addressing the major social issues that government is struggling—and often failing—to address. In her inaugural speech, Ms. Kimmet noted that the profession has evolved from “the personnel function” to a recognition within the C-Suite that “if we focus on culture we can really make a difference in this organization’s performance. Yet, we’ve by no means cracked the code so I don’t think in the next 50 years we can rest on our laurels from the great work that’s been done in the preceding 50.” She also noted that there is “a growing intolerance with being affiliated with companies that don’t want to do the right thing. There’s a strong and growing expectation that our companies have to play a greater role and I think that’s going to cause us to rethink how we show up and how we think about the workforce each and every day.” Before turning the reins over to Ms. Kimmet, outgoing Chair Mirian Graddick-Weir, Executive Vice President, Human Resources of Merck & Co., Inc. noted that “she couldn’t be prouder of what the Association has accomplished in the past 50 years and Pam, who is truly a class act, will do an amazing job as our new leader and we have certainly left plenty of challenges for her to tackle.” Echoing similar praise from HR Policy CEO Dan Yager, Ms. Kimmet heralded the leadership of Ms. Graddick-Weir, noting that “she casts a very long shadow” and has “challenged us to continually ensure that we not only serve our members with excellence, but that we help make our impact felt in ways that can evolve our function for the future.” Highlights of the meeting included:
- The Friday afternoon session was devoted to an interactive discussion with the membership, led by Ms. Kimmet and HR Policy Executive Vice President Tim Bartl, of the evolving expectations regarding large companies and how the Association can best serve the CHRO role in addressing those expectations.
- Incoming Center On Executive Compensation Chair Mara Swan, EVP Global Strategy and Talent, ManpowerGroup, led a discussion of how companies are preparing to deal with executive pay ratio disclosures, including responses to those recently released.
- A panel moderated by Ms. Graddick-Weir focused on how CHROs respond to crisis situations outside the norm, such as natural disasters, cyber-attacks (both external and internal), and the reaction to the revelation of workplace sexual harassment allegations.
- Mr. Yager and American Health Policy Institute CEO Shelly Carlin led a briefing by the Association staff of the various policy issues, including sexual harassment, single payer health insurance, and the continuing surge of state and local workplace regulations.
- CEO Emeritus Jeff McGuiness and the HR Policy staff guided the membership through a powerful review of the history of the Association and its numerous accomplishments.
- The meeting included a stellar line-up of outside speakers, including Nicolle Wallace of MSNBC, former Sen. Tom Coburn (R-OK), Former Democratic National Committee Chair Donna Brazile, and Rana Foroohar of the Financial Times.
Panel Focuses on the Evolving Role of the CHRO as the Association Looks Forward to Its Next 50 Years
Moderators Pam Kimmet and Tim Bartl led a discussion of the corporation’s role in society Friday afternoon. It explored the impact on CHROs of issues such as company culture and corporate purpose, societal expectation for corporate leaders on social and economic issues, and the debate around the public reporting of ESG metrics. Kicking off the panel, Ms. Kimmet indicated that it is no longer enough for companies to “keep their heads down” and that government dysfunction has led to suggestions by the public “and our own employees that companies should take a much greater role in societal issues.”
- Ms. Kimmet noted that while trust in major U.S. institutions had dropped 37 points, according to the 2018 Edelman Global Trust Report, belief in U.S. companies to do the right thing had increased more than most countries in the last year. She also explained that companies must manage contradictions between shareholders’ expectations for performance and customers and employees’ expectations for greater engagement on environmental and social issues.
- Holly Tyson, Chief Human Resources Officers for Dick’s Sporting Goods, discussed the company’s decision to remove assault-style guns from its stores, and the CEO’s public announcement of the decision on Good Morning America!, She stated that companies need to make tough decisions consistent with their conscience and beliefs and be authentic in discussing them.
- Jacqueline Williams-Roll, Senior Vice President and Chief Human Resources Officer, General Mills, discussed management’s decision to transform the company to “compete to win.” The move sparked the development of a corporate purpose and the transformation of the culture while retaining the company’s core values and being mindful of performance and the company’s history of corporate social responsibility.
- Don Mulligan, Chief Financial Officer, General Mills, discussed the balance between performance and purpose. He noted that the company states explicitly both internally and externally that it needs to win for its shareholders to earn the right to succeed for other stakeholders—and yet, by succeeding for customers, employees, and other stakeholders, shareholder value is created.
- Dionne Wallace-Oakley, Executive Vice President, Human Resources and Strategy for Erie Insurance, said her company’s culture is summarized in its motto: “Above All in Service.” Dionne manages both HR and strategy and ensures that Erie Insurance is a good neighbor in Northwest Pennsylvania where it is the largest employer in the community.
CHROs in the audience then broke into small group discussions on these topics. The readouts of these discussions will help determine what role the Association should play on these issues going forward.
Executive Compensation Panel Tackles Pay Ratio, Implications of Tax Reform
Center On Executive Compensation Chair Mara Swan, Executive Vice President, Global Strategy and Talent at ManpowerGroup, moderated a discussion of several executive compensation issues, including the first disclosures of the pay ratio, the implications of tax reform, including the impact on executive pay and company investment decisions. Joining her on the panel were Paulette Alviti, Senior Vice President, Chief Human Resources Officer, Foot Locker, Inc., Robert Duffy, Senior Vice President, Human Resources and Administration, Harris Corporation, Thomas Plath, Senior Vice President, Human Resources and Global Citizenship, International Paper Company, Christopher Wightman, Partner, CamberView Partners, and Ani Huang, Vice Present, HR Policy Association and Senior Vice President, Center On Executive Compensation.
- Pay Ratio: The Center’s Ani Huang began the pay ratio discussion by detailing a recent study by Equilar of about 350 companies which found that both industry and company size were leading indicators of the size of the pay ratio. The panelists each provided their views regarding preparation for pay ratio disclosures at their companies. CamberView’s Chris Wightman, formerly of Vanguard, gave his views on how investors will look at the pay ratio, noting there has been an "evolutionary change in how investors think about longer term sustainable business practices generally and now have a heightened focus on topics such as gender pay equity and climate risk.” However, according to Wightman, although the pay ratio may be used within the public policy debate regarding inequality in the future, as far as shareholders are concerned the pay ratio “will be added into a broader analysis in how investors will look at executive compensation generally.”
- Implications of Tax Reform on Executive Compensation: After pay ratio, the panel focused on the implications of tax reform, including the potential for adjustments in FY 2017 as well as the repeal of the pay for performance exception in Section 162(m), with several of the panelists noting that it was perhaps too early to determine whether companies would make use of newly found flexibility due to not having to take the steps to qualify for the deduction. However, there was hope on the panel that the additional flexibility could allow companies to better ensure that performance measures are aligned with the evolving environment.
- Post-Tax Reform Employee Investments: Robert Duffy discussed how Harris Corporation viewed the tax reform effort as an engagement opportunity for HR, noting, “We took a look at internal survey data and asked ourselves, what would it be like if we could get all of our employees to be shareholders of the company?” The question prompted Harris to take steps to issue 10 shares of stock to all non-executive employees. The move, according to Mr. Duffy, has been very well received by the employees and provides a connection to the firm’s strategy of driving shareholder return. The other panelists provided insight on how they evaluated the course of action post-tax reform. There was a consensus on the panel that companies were already doing much to invest in their workforces, but tax reform shined a spotlight on specific examples. The panelists felt that on a continuing basis companies should focus on how to highlight those ongoing investments.
Leading CHROs Share How to Respond When the Playbook Doesn’t Work
Immediate Past Chair Mirian Graddick-Weir, Executive Vice President, Human Resources for Merck, was joined by Michael Fraccaro, Chief Human Resources Officer for MasterCard, Susan Schmitt, Senior Vice President, Human Resources for Rockwell Automation, and Katy Theroux, Chief Human Resources Officer for NCI Building Systems, in a fascinating discussion of how CHROs respond to critical situations when traditional policies and procedures cannot be relied upon or have to be adapted on the fly. The panelists recounted their experiences with sexual harassment in the workplace, cyber-security threats and Hurricane Harvey, and gave insights into their internal and external response strategies.
- Ms. Graddick-Weir summarized the events of the past year that have “sorely tested the ability of CHROs to rise to the occasion and deal with the unanticipated,” such as the unprecedented use of Twitter by the President, cyber-attacks, mass shootings and natural disasters.
- Mr. Fraccaro discussed MasterCard’s approach to preventing and remedying sexual harassment. He and his company have stressed “power and culture” and “tone at the top” to create an environment that prevents the abuse of power and limits inappropriate conduct. He referenced his recent blog post, “Delivering on Decency,” which reinforced messages from the CEO regarding “decency in everything we do.”
- Ms. Graddick-Weir spoke about a recent cyber-attack at Merck and challenges of communicating to 68,000 employees across the globe without access to email. She encouraged companies to include a full-scale cyber-attack in risk reviews and balance prevention with recovery in planning. The panel then turned to Ms. Schmitt to discuss how HR can “mitigate insider risks, such as information theft and cyber sabotage,” including by paying attention to concerning negative behaviors and monitoring data transfers by employees who will be resigning. Ms. Schmitt invited the conference attendees to attend Rockwell Automation’s free Insider Risk Workshop for CHROs and Chief Security Officers on October 24-25, which will be led by Rockwell’s Chief Security Officer Dawn Cappelli.
- Ms. Theroux closed out the session by discussing her Houston-based company’s response to Hurricane Harvey. Using information oprovided by HR Policy Association, she led the way reaching out to and collaborating with other Houston-based CHROs. She said, “don’t just look internally in a crisis—look externally for resources and help.” Ms. Theroux and her employer moved quickly to give employees gift cards to spend on food and shelter. She also shepherded employees from other areas who wanted to help their colleagues in the most effective way.
Political Experts Call on Companies to Become Players in the Public Policy Sphere: “You Better Have a Plan for the Next Big Moment”
Three of the nation’s most prominent political thought leaders—former Senator Tom Coburn, former Democratic National Committee Chair Donna Brazile, and former White House Communications Director Nicolle Wallace—challenged Chief Human Resource Officers to go beyond simply being good corporate citizens and “start leading.” With our public institutions dysfunctional, non-functional or both, Sen. Coburn asserted, “We need to face the fact that our country is in a crisis.” So that the citizenry can regain trust in government, Ms. Brazile urged the participants “to play a more strategic role in the public policy sphere.” Sen. Coburn commended the audience, saying “It is really healthy that corporate America is starting to take some stands that matter,” emphasizing that “the clarity of where a company stands is important.” Nicolle Wallace, who hosts Deadline: White House on MSNBC, elaborated, “Every company is going to be looked to, to do the sorts of things politicians used to do.” Describing the new reality, she said “People are looking to you. You have a more direct connection as a company to your customers than any politician has to their constituents except maybe mayors. This is the new normal. Every single action is now expected to have a reaction in corporate America.” She counseled, “Every company has to have a plan. You’ve got to have a plan. Our politics has failed, Washington has failed, and no one is even looking at them now” for leadership. “It’s on you now.”
Sexual Harassment, Health Care, Gender Equity Dominate Policy Deep Dive
In a policy "deep dive" segment led by Association President & CEO Dan Yager, the HR Policy staff examined potential policy action on issues such as sexual harassment, health care policy, and executive compensation. The panel also discussed new American Health Policy Institute initiatives and objectives under Shelly Carlin, who was recently chosen as the Institute's CEO. Highlights of the panel included:
- Stephanie Lundquist, Chief Human Resources Officer at Target Corporation, provided an update on the Association’s recruiting software initiative that has the “goal of providing a way for the membership to begin filtering and assessing the different recruiting software offerings in the market” that claim to eliminate bias in the talent selection process.
- Ms. Carlin discussed how the “energy for health reform is moving to the states,” and how the concept of a single-payer system is better thought of as a continuum, with its potential form ranging from a pure government run system to a variety of hybrid approaches. Ms. Carlin noted that while she doesn’t expect California to implement a single-payer system in the near future, the state is likely to move progressively in that direction. As the new head of AHPI, Ms. Carlin said she plans on “strengthening the Institute’s presence as the thought leader of large employers,” and to “enhance the value of what AHPI provides to members on emerging public policy issues, employer innovations, and how employers should think about health care reform as it relates to their talent strategy.”
- E.R. Anderson, HR Policy's Vice President of Communications and Public Affairs, spoke about the Association’s recently published white paper on gender pay equity issues and what state legislatures are considering related to the pay gap. She also covered developments regarding Rep. Mimi Walters' (R-CA) "Workflex in the 21st Century Act," which “is the first bill in the paid leave space that Republicans can be for.” Ms. Anderson also discussed what actions state legislatures may take this year regarding sexual harassment in the workplace.
- Mark Wilson, Chief Economist and Vice President, Health and Employment Policy for the Association, explored the “Ending Forced Arbitration of Sexual Harassment Act,” which would invalidate predispute arbitration agreements for all Title VII sex discrimination disputes, including hiring, promotions, and pay, and void all collectively bargained predispute arbitration provisions by enabling employees to immediately sue in court for any alleged violation of any federal or state law.
- Henry Eickelberg, Chief Operating Officer of the Center On Executive Compensation, covered what to expect out of the Securities and Exchange Commission (SEC) this year regarding executive compensation, what impact the House-passed “Corporate Governance Reform and Transparency Act” (H.R. 4015) might have on the SEC agenda (as well as the bill’s outlook in the Senate), and the potential for 409(a) repeal in some future tax bill.
- Executive Vice President Tim Bartl examined Sen. Warren’s “Sunlight in Workplace Harassment Act,” which would requires publicly held companies to report the total number of discrimination claims they, their contractors and subcontractors settle every year in their 10-K report, and a recent Council of Institutional Investors report that encourages boards to review five areas to mitigate sexual harassment and urges investors to question boards on those issues.
Financial Times’ Rana Foroohar Explores Sea-Change in Role of Corporation
Association Vice Chair Mara Swan, EVP of Global Strategy and Talent at ManpowerGroup, interviewed Rana Foroohar, associate editor of Financial Times, on how the private sector can take up the mantle of American leadership. Ms. Foroohar explained how our nation’s public sector is beleaguered, which has created an opening for employers to step in to deal with the intractable issues currently facing American economics and politics. In her perspective, CEOs should take a stand on issues “when their conscience calls for it and when their business calls for it.” She argued that employers should avoid focusing on short-term profits at the expense of long-term investments in the workforce and communities. Rather, “companies have to have bigger purpose” and should operate out of that purpose. Ms. Foroohar was critical of the tax reform bill, but praised companies that are investing in human capital, cognitive diversity, and the retooling education in order to prepare the workforce for the coming digital economy and AI disruption.