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Following the labor shortages that most industries are facing as a result of The Great Resignation, more investors are wanting public companies to disclose something they haven’t typically divulged before: their ability to hire and retain staff. Per a report from the Wall Street Journal, while a company’s staff is important to forecasting its profitability, investors rarely receive substantial information about them.
Most publicly traded companies report the value of their revenues, income, and inventory. However, data on human capital — e.g., turnover, promotion rates, etc. — is rarely disclosed. And if it is, it’s not in a consistent, standardized way.
Jeff Higgins, founder of workforce consulting firm the Human Capital Management Institute, told the Journal: “CEOs make these wonderful flowery statements about people being their greatest assets. Why aren’t people on the balance sheet if they are the most important asset?”
According to nonprofit group JUST Capital, 58% of the 100 largest employers in the U.S. don’t disclose the salaries and benefits paid to their workforce, while 85% don’t disclose turnover, and 97% don’t disclose promotion rates. And companies that do report statistics on human capital frequently use inconsistent methodologies, which prevents investors from being able to make apples-to-apples comparisons.
But now, investors want firms to regularly report specific data points using standardized measurements so they can compare companies with one another.
Some money managers are using data and websites like Glassdoor and LinkedIn to estimate workforce trends in the companies they cover. Others are calling for regulation that would force companies to report on such things as pay, training, job satisfaction, demographics, hiring, and promotion rates.
A spokeswoman for the California Public Employees’ Retirement System, a longtime advocate for mandatory reporting, told the Journal that the coronavirus pandemic has underscored how important human capital is to firms and their investors.
The SEC is expected to reveal a rule in the coming months requiring disclosure of standardized human capital data.
“I think they have a strong sense of urgency because of the pandemic and also because of the Great Resignation,” Higgins said.
State Street Global Advisors offers a number of ESG-focused funds with a variety of strategies and exposures. Funds include the newly launched SPDR S&P SmallCap 600 ESG ETF (ESIX), the SPDR SSGA Gender Diversity Index ETF (SHE ), and the SPDR S&P ESG ETF (EFIV).
For more news, information, and strategy, visit the ESG Channel.
