March 3, 2022

Human Capital: What a Prescriptive Disclosure Rule Could Look Like

According to its updated “human capital management” commentary, BlackRock continues to believe that companies that have strong relationships with their workforce are more likely to deliver long-term shareholder value. Particularly in this labor market, robust HCM can be a competitive advantage – so companies need to explain how they set themselves apart. The commentary outlines several workforce-related topics that BIS is expecting to understand through disclosures & engagements – which may be mapped to the SASB materiality framework or other standards.

BlackRock isn’t alone. According to this WSJ article, other asset managers, as well as pension funds, are also continuing to clamor for more “human capital” info. In response to this investor appetite for specific data, the SEC is aspiring to propose amendments to the human capital disclosure requirements in Item 101 of Regulation S-K. Here’s a reminder of what a more prescriptive rule could include:

Commission staff have been working on a rule that would mandate additional disclosures around human capital since SEC Chairman Gary Gensler took office last April. The new requirements would likely be mandatory for public companies and could touch on turnover, skills and development training, compensation, benefits, workforce demographics including diversity, and health and safety, he has said.

According to investors quoted in the article, most disclosure being provided in response to the principles-based 2020 rule isn’t getting them the info they want. In particular, the events of the past few years have heightened investor interest in turnover, health & safety, pay equity, and broader DEI progress – but only a small minority of companies publish specific metrics for those topics. Check out the memos in our “Human Capital Management” Practice Area for more analysis of disclosure trends under the current rule.

Liz Dunshee