Human Capital Management Disclosure: Early Returns From 10-K Filings
Whenever a new disclosure requirement becomes effective, one of the first things people ask is – “what are other companies doing to comply with it?” A Willis Towers Watson memo provides some insight into that by reviewing the content of early 10-K filings containing human capital management disclosure. The memo’s analysis breaks down the disclosures into two categories – descriptions of human capital resources & initiatives and disclosure of data reflecting human capital metrics. Here’s an excerpt on what companies are saying about their resources & initiatives:
Most companies included the descriptions “employee development and training” and “diversity initiatives and strategies.” This is not surprising given the societal focus on these issues during 2020. A cursory review of larger companies in our sample indicates these disclosures were leveraged from existing public statements, such as proxies and environmental, social and governance (ESG) reports.
Among the companies disclosing diversity initiatives and strategies as descriptions, two thirds enhanced their disclosure with representation metrics. Only a handful of companies disclosed concrete gender and racial diversity goals (e.g., increase the representation of both women and ethnically diverse talent by at least one percentage point year over year). We expect that more companies will continue to enhance their internal reporting processes and develop and publicize actual goals in these areas; therefore, an uptick in their prevalence as metrics disclosed in future filings is likely.
Almost every disclosure also included at least one human capital metric. Workforce profiles were the most common of these, with the total number of employees disclosed being most prevalent metric. Information about the total number of employees appeared in 94% of filings. That isn’t surprising, since that kind of disclosure was previously required in 10-K filings.
What is a little surprising is that this was the only metric to appear in a majority of the 10-K filings reviewed. Gender representation and diversity & inclusion were the next most popular metrics, and appeared in 44% and 38% of filings, respectively. Other metrics discussed in some filings included union representation, training, and employee turnover or retention rates.
-John Jenkins, TheCorporateConsel.net February 3, 2021
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