U.S. Sen. Mark R. Warner (D-VA) and U.S. Rep. Cindy Axne (D-IA) have reintroduced legislation to require public companies to disclose crucial workforce management metrics, including investments made in skills training, workforce safety, and employee retention.
“In our information-based economy, workers are easily one of the most valuable assets that a company can have. However, there continues to be too much variability among public companies when it comes to disclosing human capital metrics,” said Sen. Warner. “This legislation will help provide a clearer picture of how public companies are managing, supporting, and investing in their workers – factors that significantly influence a company’s ability to innovate and compete.”
“Over the past century, we’ve seen businesses become less reliant on physical assets and more reliant on their workers, but the public disclosures we ask of our businesses don’t cover the investments they’re making in their employees,” said Rep. Axne. “We expect our public companies to disclose their holdings and their balance sheets – but in an economy that needs people in order to be productive, we must keep that same transparency to make the U.S. a leader in helping investors understand the long-term prospects of the companies they’re investing in. The COVID-19 pandemic has only emphasized how important this information is, especially when it comes to workplace health and safety or the ability to work from home.”
In 1975, more than 80 percent of the S&P 500’s market value was in companies’ tangible assets, such as real estate holdings or purchased equipment. By 2015, tangible assets accounted for less than 20 percent.
The Workforce Investment Disclosure Act would require public companies to disclose basic human capital metrics, which have an increasingly high value across industries in our 21st century economy. These metrics include workforce turnover rates, skills and development training, workforce health and safety, workforce engagement, and compensation statistics. This legislation would build on existing disclosure requirements, which do not currently provide sufficient information for potential workers and investors looking to evaluate modern businesses.
“This bill takes disclosure on every company’s most valuable asset, People, out of the shadows and into the light. Every public and private company should be sharing these metrics in their public disclosures.” Jeff Higgins, founder and CEO of Human Capital Management Institute.
“We know that human health, safety, and well-being are material to businesses’ bottom line, and human-centered policy interventions are critical to improving employee health, engagement and productivity,” said Rachel Hodgdon, president and CEO of the International WELL Building Institute. “We commend Rep. Axne and Sen. Warner for their continued leadership and introduction of the Workforce Investment Disclosure Act. This bill, which takes a significant step forward on driving transparency and incentivizing investment in the workforce, will help ensure businesses prioritize the overall welfare of their most valuable asset – their people. By simply compelling businesses to report on their workforce management policies, we can accelerate better corporate practices, recognize market leaders and spur powerful investments in the health, safety and equity of employees around the country.”
Gary Gensler, the new chair of the SEC, recently said that updating disclosure rules on workforce metrics would be an “early focus” and a “top priority” of his tenure. Both Chairman Gensler and his predecessor, Chairman Jay Clayton, have affirmed the need for more information about companies’ human capital.
The bill has the support of the California State Teachers Retirement System and the National Employment Law Project. Additionally, notable investment and asset management firms already support updating these disclosure requirements.
In 2019, leadership of major investors BlackRock and State Street Global Advisory both emphasized the importance of human capital — and have indicated the need to create standardized reporting. In addition, research from the Embankment Project on Inclusive Capitalism, a partnership between asset managers directing $30 trillion and large public corporations, found U.S. companies that disclose their total human capital costs outperform those that do not.
Sen. Warner, a former entrepreneur and venture capitalist, has long stressed the importance of updating human capital disclosure requirements to reflect the priorities of modern companies. In a May 2020 letter to the U.S. Securities and Exchange Commission, Sen. Warner and Rep. Axne urged the SEC to require that human capital management information be made publicly available in a timely and accurate manner to help determine whether a company will be successfully able to weather risks following the COVID-19 crisis.
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