Human Capital Disclosure: What Do Companies Say About Their 'Most Important Asset'?

8 Pages Posted: 5 May 2021

See all articles by Amit Batish

Amit Batish

Equilar

Andrew Gordon

Equilar

John D. Kepler

Stanford Graduate School of Business

David F. Larcker

Stanford University - Graduate School of Business; European Corporate Governance Institute (ECGI); Stanford University - Arthur & Toni Rembe Rock Center for Corporate Governance

Brian Tayan

Stanford University - Graduate School of Business

Courtney Yu

Equilar

Date Written: May 5, 2021

Abstract

In 2020, the Securities and Exchange Commission revised human capital disclosure rules to improve shareholder understanding of how HCM contributes to corporate value and strategy. In this Closer Look, we examine early disclosure choices that companies have made under these rules to evaluate the information they share about employment practices. We find that while some companies are transparent in explaining the philosophy, design, and focus of their HCM, most disclosure is boilerplate and lacks quantitative metrics. As such, the new rules appear to contribute to the length but not the informativeness of 10-K disclosure.

We ask:
• Are companies being evasive, or are they in the early stages of determining what information is relevant to the market?
• Will market pressure lead to better disclosure over time?
• Can a company provide informative disclosure without providing concrete metrics?
• Is there a way to describe comprehensive HCM efforts in concise and informative language, supplemented with data, in a manner that does not reveal proprietary practices?

Keywords: Corporate governance, human capital management, HCM, incentives systems, disclosure, diversity, SEC, disclosure, talent development, metrics, employee satisfaction, engagement, safety, compensation, annual bonus, long-term incentives, corporate governance research

Suggested Citation

Batish, Amit and Gordon, Andrew and Kepler, John and Larcker, David F. and Tayan, Brian and Yu, Courtney, Human Capital Disclosure: What Do Companies Say About Their 'Most Important Asset'? (May 5, 2021). Rock Center for Corporate Governance at Stanford University Working Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=3840412

Amit Batish (Contact Author)

Equilar ( email )

1100 Marshall St.
Redwood City, CA 94063
United States
(877) 441-6090 (Phone)
94063 (Fax)

HOME PAGE: http://equilar.com

Andrew Gordon

Equilar ( email )

1100 Marshall St.
Redwood City, CA 94063
United States
94063 (Fax)

HOME PAGE: http://equilar.com

John Kepler

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

David F. Larcker

Stanford University - Graduate School of Business ( email )

Graduate School of Business
518 Memorial Way
Stanford, CA 94305-5015
United States
650-725-6159 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Stanford University - Arthur & Toni Rembe Rock Center for Corporate Governance ( email )

Crown Quadrangle 559 Nathan Ab
Stanford, CA 94305-8610
United States

Brian Tayan

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Courtney Yu

Equilar ( email )

1100 Marshall St.
Redwood City, CA 94063
United States
94063 (Fax)

HOME PAGE: http://equilar.com

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