Will there be mandates on disclosures related to Human Capital Management?

October 22, 2020

The terms applied to the employee of large business enterprises has evolved as the nature of work has changed. Society moved from primarily agriculture as prime employer at the start of the 20th Century to manufacturing industry jobs being dominant mid-century and moving to the 21st Century, to service and intellectual career pursuits.  Over time, references to employees changed in the transitions.

The familiar phrase – “Our assets go out of the front doors every day at 5 p.m.” -- has frequently been expressed as senior managements talking about their employee workforce. Apply now the term “human capital” or “human assets” and we have a pretty good idea of the importance of the 21 st Century workforce to stakeholders.

The forward-focused advocates of corporate integrated reporting see six capitals as the foundation of the corporation (and are necessary for the resulting more disclosure of the performance and other factors of each): Financial, manufactured, natural, intellectual, social / relationship – and human capital. (Concept: this approach to disclosure provides a more complete depiction of how a company creates value for stakeholders.)

In the United States of America, public company disclosure has been focused on the financial with rules-based disclosure & reporting approaches. That is changing with many more companies now voluntarily publishing more principles-based reports – sustainability, responsibility, ESG, corporate citizenship, and other titles.

In recognition of increasing investor focus on the “non-financial” and “intangible” aspects of the corporate sector, the updating of the Regulation S-K disclosure rules by the Securities & Exchange Commission (SEC) is underway. In the process, the Commission publishes draft rules, invites public comment, considers same, and then issues Final Rules.

Two aspects were being considered with a Draft Rule now made Final: (1) accommodating more Principles- based corporate reporting; and (2) requiring or encouraging expanded disclosure related to Human Capital Management (HCM). The disclosure rule is about to go into effect.  We’ve created a Resource Guide to help managers understand the background of these developments with information about the Final Rule.

Fill out the form on the right to download a copy.