The Advisors' Blog

I hope everyone is having a relaxing & carefree summer. Live it up, because – as Meredith blogged a few weeks ago on TheCorporateCounsel.net – things are gonna get real on the SEC rulemaking front this fall (or maybe even yet this summer! Who knows!). One of the items in the “proposed rule” stage that the Commission has been signaling may arrive sooner rather than later is “Human Capital Management Disclosure.” We expect the SEC to propose more prescriptive line-item disclosures than what is currently required under the principles-based rule that was modernized a few years ago.

There’s speculation that the proposal will require disaggregated financial reporting and/or tabular disclosure for human capital matters. That’s based in part on calls from the “Human Capital Management Coalition,” which submitted an SEC rulemaking petition last summer. A new 18-page overview from Schroders, CalPERS and the University of Oxford implies that investor interest in this info is still alive and well. Not only is this overview very thorough, but this press release also links to 5 separate reports that dive into the specific issues of measuring safety risks and other topics.

The report takes a stab at translating “human capital” into quantitative (and qualitative) measures that can guide investor engagements on productivity and profitability – i.e., info these investors want you to provide. It also characterizes the HCMC’s call for standardized reporting as being a more balanced approach than many of the other frameworks that are circulating on this topic. The report says that as it stands right now, The HCMC supports mandatory reporting of the following “foundational” disclosures:

1. how many workers (including employees and independent contractors) the company uses to accomplish its strategy;

2. total cost of the workforce, presented in a way that evidences a discernible through-line from the company’s audited financial reports to issuer disclosures;

3. turnover, including management’s actions to attract and retain workers and how changes in the ability to attract and retain workers affects the company’s performance and strategy; and

4. diversity data, including diversity by seniority, sufficient to understand the company’s efforts to access and develop new sources of human capital and any strengths or weaknesses in its ability to do so.

But wait, there’s more. Beyond the Human Capital Management Coalition, you might recall that last year the FASB moved forward with considering an income statement reporting requirement for employee compensation. This Journal of Accountancy article says that FASB tentatively approved that project earlier this year and might issue an exposure draft in July that elaborates and seeks comment on disaggregated line items. This summary from January shows an example of what it could look like.

We’ll be discussing what you need to do about “human capital management” oversight & disclosure at our upcoming “Proxy Disclosure & 20th Annual Executive Compensation Conferences” – which are coming up virtually September 20th – 22nd. Hear what you need to do about these disclosure initiatives (including the SEC’s proposal, if it’s issued by then), and how to balance the information demands with the new risks arising from the SCOTUS’s recent affirmative action decision.

We’ve got a terrific lineup of speakers who will be delivering practical takeaways & action items – essential info for all of us who are grappling with the SEC’s ambitious regulatory agenda. Here’s the 3-day, action-packed agenda for both Conferences, which are bundled together (here’s the agenda specifically for the Executive Compensation Conference). Make yourself look good by getting insights direct from the experts! And for the lawyers out there, get CLE credit while you’re at it!

The Conferences are virtual, September 20th – 22nd. You can also add registration for our “2nd Annual Practical ESG Conference” that’s happening virtually on September 19th, for an additional discount. Register online by credit card – or by emailing sales@ccrcorp.com. Or, call 1.800.737.1271.

– Liz Dunshee