Speaking before the SEC’s 8th Annual Conference on Financial Market Regulation, SEC Chair Gary Gensler reportedly stated that the Staff was working on a new rule addressing disclosure of human capital metrics. If you’re thinking, “Didn’t they just do this?” the answer is “sort of.” Last year’s S-K modernization rules addressed human capital, but from a principles-based perspective only. Now, they’re talking about mandatory line-item disclosures focusing on specific metrics.
What might those metrics be? Commissioner Lee’s dissenting statement on last year’s rule adoption might provide some insight. In that statement, she cited favorably comments on the rule proposal received from the Human Capital Management Association, which called for a combination of a principles-based and line-item disclosures. In particular, the HCMA cited four specific metrics that should be required disclosure for all registrants:
- The number of people employed by the issuer, broken down by full-time and part-time employees along with contingent workers who produce its products or provide its services (independent contractors, supplied through subcontracting relationship, temporary employees, etc.);
- The total cost of the issuer’s workforce, including wages, benefits and other transfer payments, and other employee expenses;
- Turnover or similar workforce stability metric; and
- Workforce diversity data, concentrating on gender and ethnic/racial diversity across different levels of seniority.
These four metrics also have been cited in media reports concerning Gary Gensler’s remarks about a new human capital rule proposal, and given Commissioner Lee’s prior favorable reference to the HCMA comment letter, it’s probably a pretty good bet that they are likely to be included in any proposal forthcoming from the SEC.
-John Jenkins, TheCorporateCounsel.net May 17, 2021
