During these interesting times, each week I hope to tap out a blog or two of which I am not entirely ashamed. I have posted several times on the question of whether all compensation committees should formally assume the responsibility for human capital management issues, as many already have done. Unique among the stock market crashes and economic crises of the past 90 years (and no, I haven’t been practicing law during all of them), the current pandemic has brought to the fore human capital issues rather than financial or economic ones. Since the spotlight is on human capital management issues, and someone has to assume the responsibility for them, those compensation committees that have not already assumed the responsibility for human capital management may revise their committee charters, adopt principles, and do so.
One of the best discussions I have heard on this subject was Willis Towers Watson’s recent webcast. The WTW presentation emphasizes that the reduced capacity of workers to do their jobs led to the rapid stock market decline, and economic value will be restored only through collective efforts of investors, consumers, and employees. Currently and in the near future, investors will be closely monitoring boards’ and companies’ management of human capital risks, as those could be the key to a company’s recovery. Continuing the trend that began well before the pandemic, boards will increasingly be asked to oversee human capital issues effectively and to support discussions with shareholders.
For further guidance on the types of measurable factors subsumed within the category of human capital management, committees also should look to the Recommendation from the SEC’s Investor-as-Owner Subcommittee on Human Capital Disclosure, the Human Capital Management Coalition’s petition to the SEC, and the SEC’s own disclosure proposals on the subject.
-Mike Melbinger, CompensationStandards.com May 15, 2020
