Human Capital Disclosure: What to Know About the SEC’s Proposed Rule

Human Capital Disclosure: What to Know About the SEC’s Proposed Rule

Public companies may soon be required to complete human capital disclosures in the United States. 

The U.S. Securities and Exchange Commission, which made the proposal in August 2019, says current disclosure requirements are outdated. Existing requirements focus on business assets but not human capital, which the SEC says needs to change.

Here, we look at the proposed changes to Regulation S-K and what this means for public companies in the U.S.

Why the SEC Is Concerned With Human Capital Management

Human capital management refers to how a company manages its workers. This includes matters of recruitment, retention, talent development, training, health and safety, productivity, diversity and inclusion, and culture, as attorney Thomas Asmar at Baker McKenzie explains. 

The employees in a company create value for that business while also boosting its longevity and mitigating risks. Investors and shareholders are therefore interested in a company’s human capital management practices. 

The SEC, then, thinks publicly traded companies should offer investors a more transparent glimpse into how they manage employees and what impact this has on turnover, productivity and company performance.

What the Proposed Rule Would Mean for Companies

The SEC’s proposed changes pertain to Regulation S-K, which describes a public company’s reporting

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