The upcoming Human Capital Management Disclosure project, scheduled for Spring 2024, is marked by a shift in how companies report on their workforce. This shift is propelled by a unanimous recommendation from the Securities and Exchange Commission’s Investor Advisory Committee (IAC). The committee has advised the SEC to craft a rule mandating publicly traded companies to furnish more detailed information regarding their workforce. This includes the total cost of the company’s labor, broken down into major components of compensation, addressing a critical gap in current disclosure practices.
Here’s a quick rundown of what companies will have to share because of the SEC rules:
Who’s Who: Companies must break down their workforce by full-time, part-time, and temporary workers.
Staying or Going: They should share info about employee turnover or how stable their workforce is.
Money Talks: They need to talk about how much they spend on their workforce, including salaries and benefits.
Demographic Insights: Companies should also share how diverse their workforce is, helping us see if they’re bringing in different kinds of talent.
Narrative Disclosure: Furthermore, the IAC advocates for narrative disclosures within the Management’s Discussion and Analysis (MD&A) section, elaborating on how labor practices and compensation incentives align with the company’s broader strategic goals.
These recommendations mark a shift towards more granular and meaningful human capital disclosures, moving beyond the principles-based approach that has characterized the SEC’s 2020 revisions. Critics, including senior figures at the CFA Institute, have highlighted the limitations of the current guidelines, which they argue offer qualitative, fragmented insights that fail to connect workforce data to a company’s value-creating activities.
By offering a clearer view of labor costs, workforce composition, and strategic alignment, companies can demonstrate their commitment to sustainable practices and strategic growth. Such disclosures could significantly impact investment decisions, as they offer a deeper dive into the factors that contribute to a company’s success beyond financial metrics alone.
Explore how Harmony Analytics can support your evaluation of human capital metrics and enhance your strategic decision-making. Visit the Harmony Solution page to find out more about our services and stay at the forefront of the evolving corporate disclosure landscape.
