What’s on the Horizon for the SEC’s Human Capital Disclosure Rules? 

Depending on who you talk to, the SEC’s principles-based human capital disclosure rules, released in 2020, were either a positive step forward, or a supreme flop. Many applauded the intent and flexibility of the rules, however that same flexibility has frequently led to disclosures that lack transparency and prevent apples to apples comparisons. 

For example, in one recent Harvard study of 3,000 public company 10-Ks, most human capital disclosures were found to be “overwhelmingly positive,” and 18 percent had disclosures shorter than 100 words.   

Our analysis of the workforce disclosures S&P 500 companies have been reporting:

  • 486 companies reported workforce representation (demographic data) in any one of their latest disclosures, while only 100 report it in their latest 10-K. 
  • 392 companies disclose employee development and pay equity data in any one of their latest disclosures, while only 63 report it in their latest 10-K. 

Many expect to be able to comment on the SEC’s much anticipated reboot this year. What will that proposal include? No one is certain, but one window into the possibilities can be seen in the petitions and letters that have been sent to the SEC so far.

Here are a few highlights from the human capital letters sent to the SEC: 

  • The New York State and New York City Comptrollers, as well as the Treasurers of Rhode Island and Connecticut, cite research from Disability:IN, and ask for disability statistics to be included in the rules. 
  • The heads of the country’s largest labor unions call out the plight of independent contractors, and suggest three potential methods for identifying a company’s material workforce.
  • Boston Walden, along with several pension funds, state treasurers, and asset managers are asking for mandatory annual publication of EEO-1 reports. 
  • The Working Group on Human Capital Accounting Disclosure, an academic group that includes two former SEC Commissioners, wants companies to disclose labor costs that are investments in their growth, and to have those costs disaggregated in their income statements. The Group also suggests a template for reporting workforce investments.

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