House Passes Measure Requiring Employee Location Disclosure

October 25, 2019

The House of Representatives passed a bill (H.R. 3624) requiring public companies to report to the SEC the number of workers they employ in each U.S. state, territory, and foreign country, as well as percentage changes in these respective populations from the previous year.

Little value to disclosure:  The bill’s sponsor, Rep. Cindy Axne (D-IA), contended that the bill would cause companies to “think twice about such unpopular actions.”  But House Republicans, led by Reps. Patrick McHenry (R-NC) and Bill Huizenga (R-MI), questioned the value of the disclosures.  McHenry labelled the bill “a political talking point, not a piece of legislation,” and asked “how shaming a company benefits the everyday investor, or encourages more companies to go public, or brings more vibrant capital markets here in the United States or creates jobs here in the United States.”  Huizenga said: “We need to stop mandating frivolous disclosures for public companies.  Well, we already have two with the CEO pay ratio and the conflict minerals.  The only plausible explanation for this bill is to use the information to try to shame public companies based on incomplete and misleading information.”

Outlook:  The bill passed largely along party lines—226 to 184—with two Republicans breaking ranks: Chris Smith (NJ) and David McKinley (WV).  The bill is unlikely to see any action in the Senate.  Meanwhile, while harsher mechanisms for addressing outsourcing are sometimes proposed, the preferred technique on this, as with many other issues, seems to be greater disclosure.  Yet, opponents correctly ask what value such disclosures bring other than arming critics seeking to “blame and shame” companies.