Considering Human Capital Management Disclosure as Corporate Disclosure and Reporting Rules Are Being Updated by the U.S. Securities & Exchange Commission

A G&A Resource Guide

Labor…”hand”…worker...employee…human capital (or asset). 

The terms applied to the employee of large business enterprises has evolved as the nature of work has changed. Society moved from primarily agriculture as prime employer at the start of the 20 th Century to industry and manufacturing by mid-20 th Century and now to service and intellectual career pursuits in the decades of the 21 st Century. References to employees changed in these transitions.

The familiar phrase – “Our assets go out of the front doors every day at 5 p.m.” has long been expressed as senior managements talked about the employee workforce. Apply the term “human capital” or “human assets” and we have a pretty good idea of the importance of the 21 st Century workforce.

The forward-focused advocates of corporate integrated reporting see six capitals as the foundation of the corporation (and are necessary for the resulting more disclosure of the performance and other factors of each): Financial, manufactured, natural, intellectual, social / relationship – and human capitals. (Concept: this approach to disclosure provides a more complete depiction of how a company creates value for stakeholders.)

In the United States of America, much of public company disclosure has been focused on the financial with rules-based disclosure & reporting approaches. That is changing with many companies now voluntarily publishing more principles-based reports – sustainability, responsibility, ESG, corporate citizenship, and other titles.

In recognition of increasing investor focus on the “non-financial” and “intangible” aspects of the corporate sector, the updating of the Regulation S-K disclosure rules by the Securities & Exchange Commission (SEC) is underway. In the process, the Commission publishes draft rules, invites public comment, considers same, and then issues Final Rules.

Two aspects are being considered with a Draft Rule now: (1) accommodating more Principles- based corporate reporting; and (2) requiring disclosure related to Human Capital Management (HCM). Nothing is final yet. Examining the HCM possible reporting requirements for public companies, we’ve created a Resource Guide to help managers understand the background of these developments.

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