August 12, 2020
Human Capital: Tipping Point for Board Involvement
– Liz Dunshee
We’ve been blogging about “human capital” as an emerging issue for a few years now, but it feels like this year has been the tipping point for the topic to attract significant attention. Momentum was building around long-term corporate purpose and commitments to “stakeholders,” and pay ratio disclosure led to greater exposure & examination of income inequality. Against that backdrop, the pandemic and social unrest have united many investors in their focus on workforce health & safety, as well as pay equity and diversity & inclusion. Investors want to know the board is attuned to these issues, and companies are recognizing that.
As I blogged last fall, some compensation committees are beginning to change their names to reflect a broader “human capital” role. This E&Y memo says that express board oversight is becoming much more common. Here’s an excerpt:
Investors’ prioritization of workforce issues manifested in a number of ways, from publicly-declared stewardship goals to high-profile letter campaigns to record-level support of related shareholder proposals.
This year’s proxy disclosures demonstrate that many companies are paying attention: the percentage of Fortune 100 companies that voluntarily highlighted human capital initiatives and commitments more than doubled over the past three years, rising from 32% in 2017 to 77% in 2020. Similarly, the percentage of companies that explicitly assigned board or committee oversight of human capital jumped from 28% in 2017 to 69% in 2020, with those responsibilities generally assigned to compensation committees.
The memo notes that the “top 5” human capital topics addressed are: diversity; health, wellness & safety; compensation; and development, skills & capabilities – and points out that how a company treats employees in the wake of the COVID-19 crisis could affect its brand value for years to come.
At our upcoming “Proxy Disclosure & Executive Compensation” Conferences, we have a panel featuring Keir Gumbs of Uber, Blair Jones of Semler Brossy and Maj Vaseghi of Freshfields who will be discussing the Compensation Committee’s growing role in human capital management. These conferences are coming up September 21st – 23rd and will be held virtually so that everyone can safely attend. Check out the agendas – 15 panels over 3 days. Register today to make sure you get the info you need to know for your fall engagements and the approaching proxy season.