With proxy season almost over, we’re diving deep on the latest human capital disclosure trends.
This report will share trends in disclosure, broken into Workforce Representation, Board of Director Data, Employee Development, and Transparency Score (a DiversIQ metric).
Join Founder and CEO Josh Ramer for this fireside chat where we covered:
Workforce representation (EEO-1) | Board of director diversity | Hiring, promotion, and turnover | Pay equity and pay gap data
Additionally, we talked through the DiversIQ Transparency Score, which is a holistic measure of all of the above metrics together.
In the dynamic landscape of today’s business world, the concept of human capital has emerged as a central driving force behind organizational success. Beyond traditional measures of tangible assets, it is the skills, knowledge, and talents of a company’s workforce that increasingly determine its competitiveness and innovation potential.
Human capital encapsulates the collective value inherent in employees, reflecting their abilities to contribute, adapt, and lead in a rapidly evolving environment. Such disclosures encompass a wide array of human resource data, including employment demographics, diversity within the workplace, and overall workforce composition.
These insights are gaining prominence due to their ability to offer stakeholders a deeper understanding of how companies manage and harness their human resources for sustainable growth. By unraveling the layers of human capital data, we uncover the pivotal role it plays in shaping the course of businesses, industries, and economies at large.
Human capital disclosure refers to the practice of organizations providing transparent and comprehensive information about their workforce in their financial and non-financial reports. This entails sharing data on various aspects of human resources, such as employment demographics, diversity in the workplace, and workforce composition.
These disclosures are becoming increasingly important, as they offer stakeholders insights into how companies manage and leverage their human resources to drive sustainable growth. As part of these disclosures, organizations may present employment diversity statistics, highlighting the representation of different groups within their workforce. This can include gender, ethnicity, age, and other relevant demographic information. The Securities and Exchange Commission (SEC) now requires certain companies to include human capital disclosures in their annual reports, such as the Form 10-K. These disclosures offer investors and the public a deeper understanding of how a company’s human capital and diversity initiatives align with its overall business strategy.
Moreover, the link between human capital and target date funds is gaining attention, as investors seek to evaluate how workforce-related factors could impact a company’s performance over time. In essence, human capital disclosure fosters transparency and accountability, providing a clearer picture of how organizations manage and cultivate their most valuable asset—their people.
Human capital data is crucial for effective human capital management, as it allows businesses to make informed decisions about recruitment, training, performance evaluation, and overall workforce optimization. Human capital data analysts, such as the analysts at DiversIQ, play a pivotal role in collecting, analyzing, and interpreting this data to extract meaningful patterns and trends.
Human capital data analytics involves using advanced techniques to extract insights from this data. With the advent of big data and sophisticated analytical tools, businesses can now delve deeper into understanding their workforce dynamics, including factors like employee turnover, performance metrics, training needs, and diversity statistics. This information aids in strategic decision-making and aligning human capital strategies with broader organizational goals.
Efficient human capital data management involves organizing, storing, and safeguarding these valuable insights. Organizations often maintain a human capital database, where data is securely stored and easily accessible for analysis. Additionally, entities like the World Bank compile human capital index data, which assesses a country’s potential for future economic growth based on the health, education, and skills of its population.
In terms of regulatory and stakeholder reporting, the concept of human capital management disclosure has gained prominence. Regulatory bodies like the SEC require certain companies to disclose their human capital management practices in their reports. This form of disclosure offers investors and the public a glimpse into how companies value and invest in their workforce. It demonstrates a growing recognition that a company’s success is deeply intertwined with the capabilities and well-being of its employees. As such, the human capital resources disclosure provides insights into a company’s commitment to fostering a diverse and inclusive workplace, providing opportunities for skill development, and ensuring fair employment practices.
In this context, a transparency score has emerged as a metric to gauge the extent of quantitative Diversity, Equity, and Inclusion (DEI) and human capital performance measures disclosed by companies. This score evaluates the percentage of DEI and human capital data companies reveal, with a perfect score of 100 indicating full disclosure in alignment with the framework. The transparency score is structured into three categories to comprehensively assess disclosure: Board of Directors, Workforce Representation, and Employee Development. The breakdown allocates weightage to each category, with Board of Directors accounting for 20%, Workforce Representation for 50%, and Employee Development for 30% of the overall score. By integrating such a scoring system, regulatory bodies like the SEC aim to not only encourage but also quantify and reward transparent reporting on key aspects of human capital management, further reinforcing the importance of fostering diverse and inclusive workplaces that prioritize employee development and equitable representation.
Measuring human capital involves the systematic assessment and quantification of the skills, knowledge, and capabilities possessed by individuals within an organization. This process utilizes a range of methodologies, including human capital statistics, analytics, data mining, and global learning data. Human capital systems analytics and data mining allow organizations to delve into large datasets, extracting valuable insights to gauge the proficiency and potential of their workforce. Additionally, measuring human capital using global learning data provides a comprehensive view of employee development and training effectiveness on a global scale.
The concept of the Human Capital Management Coalition further underscores the importance of measuring human capital. This collaborative initiative aims to standardize reporting practices related to human capital metrics, ensuring transparency and comparability across organizations. By establishing consistent measurement frameworks, the coalition seeks to provide stakeholders with clearer insights into companies’ human capital performance, fostering informed decision-making and encouraging investments in workforce development. In essence, measuring human capital goes beyond traditional metrics to encompass a holistic understanding of employees’ competencies and their impact on organizational success.
The Nasdaq Board Diversity Proposal represents a significant step in enhancing human capital disclosure within the realm of corporate governance. This proposal, submitted to the SEC, outlines requirements for companies listed on the Nasdaq stock exchange to disclose information related to board diversity. The Nasdaq Board Diversity Proposal mandates that companies provide statistical data and information about the diversity of their boards, including the gender and underrepresented minority composition. Nearly half of S&P 500 companies disclose the individual race/ethnicity of each board member, up from less than 7% in 2020. This move by Nasdaq is driven by the recognition that diversity at the board level not only promotes a more inclusive and equitable business environment but also positively impacts decision-making and overall corporate performance.
By mandating board diversity disclosure, the Nasdaq proposal encourages companies to transparently report on their human capital management practices. This initiative aligns with the growing demand from investors and stakeholders for comprehensive information about companies’ efforts to promote diversity and inclusion within their leadership structures. The Nasdaq Board Diversity Proposal serves as a catalyst for organizations to prioritize and enhance their diversity initiatives, fostering an environment where human capital is cultivated and leveraged effectively for sustained success.
The SEC’s increasing focus on human capital disclosure has been evident through the introduction of comprehensive reporting requirements. Embedded within the broader context of Environmental, Social, and Governance (ESG) reporting, the SEC has underscored the significance of human capital as a pivotal aspect of sustainable business practices. The SEC’s Diversity, Equity, and Inclusion (DEI) disclosure requirements emphasize the importance of providing transparent information about workforce composition and diversity data as a critical element of human capital disclosure. The recent approval of the Nasdaq Board Diversity Proposal further aligns with the SEC’s commitment to enhancing board diversity and transparency.
The SEC’s human capital disclosure requirements represent a paradigm shift, recognizing that effective human capital management is instrumental in driving business performance. Companies are now expected to disclose pertinent data regarding their human capital practices, such as workforce composition, board of director diversity, and strategies for cultivating a diverse and inclusive workplace. These disclosures offer investors and stakeholders valuable insights into how companies are managing and investing in their most valuable asset—their people. The SEC’s proactive stance on human capital disclosure reflects a broader recognition of the integral role that employees play in shaping a company’s overall success, and underscores the need for organizations to prioritize robust human capital management and reporting practices in their strategic agendas.
In 2023, the significance of workforce diversity data has become more pronounced than ever before. As organizations strive for inclusivity and innovation, workforce diversity statistics have transcended mere metrics to shape strategic decision-making. The landscape of workplace diversity statistics in 2023 reflects a commitment to equity and representation, fostering environments where diverse perspectives thrive. This data not only highlights progress but also underscores the journey ahead, reminding us that harnessing the power of human capital means embracing the richness of differences. In this era of heightened awareness, workforce diversity data serves as a compass guiding businesses towards a more inclusive, dynamic, and prosperous future.
Want to learn more about human capital data? Access the Human Capital Disclosure Trend webinar by filling the form on this page today.
And download DiversIQ’s Human Capital Disclosure Trends Report here.