The new rule would require public companies to disclose more information about the “attraction, development, and retention, of personnel.” Anyone is invited to comment at the e-mail or web site address provided below.
The Securities and Exchange Commission has voted to
propose rule amendments to Regulation S-K for public companies that for the first time will recognize “that intangible assets, in particular, human capital, often are a significantly more important driver of value in today’s economy,” according to Chairman Jay Clayton. “The proposals reflect a thoughtful mix of prescriptive and principles-based requirements that should result in improved disclosures and the elimination of unnecessary costs and burdens.”
Click here to read the entire proposed rule.
According to the SEC public statement, “The proposed amendments would revise Items 101(a) (description of the general development of the business), 101(c) (narrative description of the business), and 105 (risk factors) to emphasize a more principles-based approach, because businesses differ in terms of which aspects of these disclosures are material to them. Such a flexible approach, as opposed to prescriptive requirements, may elicit more relevant disclosures about these items.”
Disclosures of Measures That Address the Attraction, Development, and Retention of Personnel
As it relates to human capital disclosures, the proposed amendment of Item 101(c) would: “include, as a disclosure topic, human capital resources, including any human capital measures or objectives that management focuses on in managing the business, to the extent such disclosures would be material to an understanding of the registrant’s business, such as, depending on the nature of the registrant’s business and workforce, measures or objectives that address the attraction, development, and retention of personnel.”
The SEC proposal elaborates: “Because human capital may represent an important resource and driver of performance for certain companies, and as part of our efforts to modernize disclosure, we propose to amend Item 101(c) to refocus registrants’ human capital resources disclosures. Specifically, we propose replacing the current requirement to disclose the number of employees with a requirement to disclose a description of the registrant’s human capital resources…”
Lee S. Webster, co-founder of the International Center for Enterprise Engagement at
TheICEE.org, which has the
first certification program for ISO 30414 Human Capital internal and external reporting guidelines and four other ISO human-capital related certifications, says, “While the wording of the proposal is vague and leaves much latitude, the fact that public companies will now be required to address the issue in public records is highly significantly. And for those companies that are not publicly held, the Chairman’s message is clear: the management of human capital is material to an organization’s wellbeing.” Adds Dr. Ron B. McKinley, co-founder of ICEE, “The significance of this requirement cannot be overstated, because it will likely set off a competitive chain reaction. Those companies that see the benefits will go to great lengths to comply with the requirement, which will put more pressure on those that don’t.” Before co-founding ICEE with Bruce Bolger, President of the
Enterprise Engagement Alliance, Webster and Dr. McKinley were founders of the first working group in ISO HR standards and managed the group for eight years.
SEC Requests Comments on Multiple Issues
The SEC requests comments on the following questions related to human capital:
• “Should disclosures regarding human capital resources, including any material human capital measures or objectives that management focuses on in managing the business, be included under Item 101(c) as a listed disclosure topic, as proposed? Should we define human capital? If so, how?
• With respect to human capital resource disclosure, should we provide non-exclusive examples of the types of measures or objectives that management may focus on in managing the business, such as, depending on the nature of the registrant’s business and workforce, measures or objectives that address the attraction, development, and retention of personnel, as proposed? Would providing specific examples potentially result in disclosure that is immaterial and not tailored to a registrant’s specific business? Would not including such examples result in a failure to elicit information that is material and, in some cases, comparable across different issuers?
• With respect to human capital resource disclosure, should we include other nonexclusive examples of measures or objectives that may be material, such as the number and types of employees, including the number of full-time, part-time, seasonal and temporary workers, to the extent disclosure of such information would be material to an understanding of the registrant’s business?
• Could other examples include, depending on the nature of the registrant’s business and workforce: measures with respect to the stability of the workforce, such as voluntary and involuntary turnover rates; measures regarding average hours of training per employee per year; information regarding human capital trends, such as competitive conditions and internal rates of hiring and promotion; measures regarding worker productivity; and the progress that management has made with respect to any objectives it has set regarding its human capital resources? Would providing specific examples potentially result in disclosure that is immaterial and not tailored to a registrant’s specific business? Would not including such examples result in a failure to elicit information that is material and, in some cases, comparable across different issuers?
•
Should we retain an explicit requirement for registrants to disclose the number of their employees? Alternatively, should we permit registrants to disclose a range of the number of its employees and/or a range for certain types of employees?”
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Online:
• 10-minute short course: click here for a 10-minute introduction to Enterprise
• Engagement and ISO standards on Coggno.com.
• 5-minute Audiopedia summary of the Enterprise Engagement field.
Services:
• The International Center for Enterprise Engagement at TheICEE.org, offering: ISO 10018 certification for employers, solution providers, and Enterprise Engagement technology platforms; Human Resources and Human Capital audits for organizations seeking to benchmark their practices and related Advisory services for the hospitality field.
• The Engagement Agency at EngagementAgency.net, offering: complete support services for employers, solution providers, and technology firms seeking to profit from formal engagement practices for themselves or their clients, including Brand and Capability audits for solution providers to make sure their products and services are up to date.
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• Speakers Bureau—Select the right speaker on any aspect of engagement for your next event.
• Mergers and Acquisitions. The Engagement Agency’s Mergers and Acquisition group is aware of multiple companies seeking to purchase firms in the engagement field. Contact Michael Mazer in confidence if your company is potentially for sale at 303-320-3777.
Enterprise Engagement Benchmark Tools: The Enterprise Engagement Alliance offers three tools to help organizations profit from Engagement. Click here to access the tools.
• ROI of Engagement Calculator. Use this tool to determine the potential return-on-investment of an engagement strategy.
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• Gauge Your Personal Level of Engagement. This survey, donated by Horsepower, enables individuals to gauge their own personal levels of engagement.
For more information, contact Bruce Bolger at Bolger@TheEEA.org, 914-591-7600, ext. 230.
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