U.S. Shareholder Coalition Asks the SEC to Mandate Disclosure of Human Capital

July 14, 2017

A coalition of 25 mostly U.S. pension funds and issue investors, including CalPERS and CalSTRS, and led by the UAW Retiree Medical Benefits Trust, submitted a petition to the SEC asking it to craft a rule requiring public companies to disclose human capital information such as worker demographics, human rights, compensation, and workforce health and safety.  The petition argues that investors "cannot adequately assess a company's business, risks and prospects, for investment, engagement or voting purposes, without information about how it is managing its human capital."  It cites investors who support its position as well as studies purporting to show a link between workforce management and better financial results.  The petition suggests the SEC craft a standard based on standards certified by the Sustainability Accounting Standards Board as well as the U.N. Guiding Principles on Business and Human Rights.  Interestingly, the petition concedes that there may be no human capital management practice or data point which is applicable to all companies and that the SEC should not impose "across-the-board disclosure requirements."  However, the petition further notes that there are certain information points which are "fundamental to human capital analysis," including the following:

  • Workforce Demographics:  Number of full and part-time workers and policies on subcontracting and outsourcing;
  • Workforce Stability:  Voluntary and involuntary turnover rate, and internal hire rate;
  • Workforce Composition:  Diversity, pay equity policies, audits and ratios;
  • Workforce Skills and Capabilities:  Training, alignment with business strategy, and the skills gap;
  • Workforce Culture and Empowerment:  Employee engagement, union representation, work-life initiatives;
  • Workforce Health and Safety:  Work-related injuries, lost day rate;
  • Workforce Productivity:  Return on cost of workforce, profit/revenue per employee;
  • Human Rights Commitments:  Principles to evaluate risk, supplier due diligence; and
  • Workforce Compensation and Incentives:  Bonuses metrics used for employees below NEO level, measures to counterbalance risks created by incentives.
The SEC is under no obligation to respond to a rulemaking petition and is not likely to act on the request.  However, demonstrating growing global interest in the subject, the petition was filed the same week that an EU shareholder coalition announced a survey initiative which seeks significant information on human capital from 75 global companies.