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Article | Executive Pay Memo North America

Executive Compensation Bulletin: SEC Advisory Committee recommends expanded disclosures on human capital management

Governance Advisory Services |Compensation Strategy & Design

By Don Delves , Andy (Andrew) Goldstein , Ryan Resch and Steve Seelig | April 5, 2019

Disclosure of human capital costs has long been required on companies’ financial statements, but they may soon have to be disclosed as an asset similar to equipment or intellectual property if a recommendation of the Securities and Exchange Commission’s (SEC’s) Investor Advisory Committee gains traction.

The recommendation is part of the SEC’s Disclosure Effectiveness Review and modernization project. It focuses on studies that show that companies are enjoying increases in their market values from intangible assets like human capital without investor clarity on how to assess this value at individual companies.

The process has just started and the SEC needs to gather more information and receive public comments, but the proposal could profoundly impact and amplify the traditional role of the board and compensation committee in overseeing management’s human capital strategy for the broad workforce beyond executives.

Read our new Executive Compensation Bulletin for additional findings from our report by clicking on the link below to download.

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