SEC Chairman Jay Clayton Emerges as a Leading Human Capital Advocate

As the SEC weighs final rules for human capital disclosures following the commenting period that closed in October, SEC Chair Jay Clayton expresses strong support in a recent Dublin speech.

SEC Chairman Jay Clayton makes a strong case for requiring human capital disclosures by public companies at a recent speech before the Financial Centres Summit in Dublin, which attracts financial services sector executives from around the world. Making a point to say that he was speaking for himself and not the SEC, he reiterated his conviction that SEC regulations should require disclosure of human capital metrics. See ESM: SEC Human Capital Proposal Draws Nearly 80 Comments, No Media Attention.

Chairman Clayton explains that a key role of the SEC is to provide “pretty rigorous disclosures by public companies.” Today, he estimates, human capital probably accounts for about 30% of a company’s balance sheet, versus about 10% a decade ago. He maintains that the failure to require any disclosures on human capital should be corrected.

“When you think about what drives value,” he explains, “The very best managers think about their people…In the financial services industry, they like to say that all their assets walk out the door every day….We want to encourage people to disclose how human capital drives value. I think it’s an important indicator.”

He observes that: “What is lacking is guidance on how to disclose your human assets, your human capital, how businesses think about the people they have. That’s a mistake.” He points out: “The most successful companies are the ones that track human capital very well.” This might include the number of engineers and their turnover rate “or other indicators relevant to the business….We want to encourage people to disclose how that human capital drives the value of their business.” He asserts that “it’s an important modernization, and we are looking for suggestions.”

Chairman Clayton uses Ireland as an example of the importance of human capital from an economic perspective. “I have visited Dublin many times, and it takes me back to the subject of human capital. This is an economy driven by individuals who live here,” with highly educated people and an incredible talent pool, he explains. Watching the city’s development from an economics point of view, he goes on to say, “Dublin is a study of how important human capital is. Yes, there are tax advantages, but all these companies wouldn’t locate in a place without great human capital. I want you to think about how to best discuss this with your colleagues in the European Union--how companies should disclose the value of their human capital.”

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