Brave New World: Creating Long-Term Value through Human Capital Management and Disclosure
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Brave New World: Creating Long-Term Value through Human Capital Management and Disclosure

December 23, 2020 | Report

Human Capital Management as an Emerging Critical Governance Area. Report of the Working Group Examining the Board’s Role in Human Capital Management and Disclosure. 

The SEC is now requiring that US public companies disclose information about human capital management “to the extent such disclosures would be material to an understanding of the registrant’s business”—such disclosure is no longer voluntary. Boards will need to determine whether human capital is material, what they need to disclose, how to contextualize human capital performance, and how they should communicate this to the investor community.

This report addresses the key topics the Working Group considered, including: establishing the link between human capital performance and corporate financial performance; quantifying human capital performance; the board’s role in overseeing human capital governance; and risk mitigation. The report provides guidance on strategic considerations as well as tactics to achieve high levels of governance quality related to human capital, a key aspect of ESG. The report also provides a view of what other governance agencies, beyond the SEC, are requiring/recommending related to qualitative or quantitative disclosures.

Examples of what other public companies have done in the past are included in the tool kit of resources.

The events of 2020—a health pandemic, social unrest, economic crises, and associated workforce disruptions—have heightened and accelerated the need for boards and senior management to focus on their firm’s workforce, to understand the relationship between human capital management (HCM) and corporate performance, and to ensure that their companies are communicating relevant HCM information to multiple stakeholders. This need is reinforced by the new US Securities and Exchange Commission (SEC) rules requiring disclosures on a company’s human capital resources, measures, and objectives that are materially important in managing the business. As boards and senior management address HCM, they face a daunting challenge: to focus on the issues that are truly key for their company’s success without getting lost in the vast sea of workforce data and metrics available to them.

As we enter this brave new world, this report provides autho

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President and CEO
Society for Corporate Governance
The Conference Board ESG Center

Rebecca L.Ray, PhD

Former Executive Vice President, Human Capital
The Conference Board

SolangeCharas, PhD

Founder & CEO
Distinguished Principal Research Fellow, Human Capital
The Conference Board

Amy LuiAbel, PhD

Head of Career Strategy and Experiences
Arch Insurance Group



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