Disclosing Human Capital Becomes an SEC Mandate

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On August 26th, the SEC modernized its disclosure rules under Regulation S-K. Arguably the most dramatic change is that companies are now required to disclose information about their environmental practices and their human capital resources to the extent that these are material to a company’s business as a whole. 

The new amendments to Reg. S-K are the first significant change to federal disclosure laws in 30 years. See fact sheet about these amendments and the SEC’s new rules in their entirety.

In his public statement on modernizing aspects of Reg. S-K, SEC Chair Jay Clayton chose “human capital” as the topic he wanted to highlight. “From a modernization standpoint, today, human capital accounts for and drives long-term business value in many companies much more so than it did 30 years ago,” he said. 

Clayton emphasized that the SEC’s amendments are principles-based rather than prescriptive. This means that metrics for human capital will differ by industry, but he still expects companies to provide both “meaningful qualitative and quantitative disclosure,” including the metrics companies “actually use in managing their affairs.”

Companies considering how to disclose their human capital resources and practices may find the task daunting. 

One of the best starting points is the human-capital disclosures made by leaders in various industries. To make finding these best-practice disclosures a little easier, DFIN will highlight companies that have taken an innovative approach to human capital disclosures in future blog posts.

For examples, see DFIN’s 2020 “Guide to Effective Proxies,” which presents a wealth of disclosure innovations.

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