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Dodd-Frank

SEC Chair Discusses Human Capital Disclosure

by   |   March 28, 2019

SEC Chairman Jay Clayton gave his views on appropriate disclosures related to human capital in opening remarks before a meeting of the SEC Investor Advisory Committee.

Chairman Clayton believes that the strength of our economy and many of our public companies is due, in significant and increasing part, to human capital, and for some of those companies human capital is a mission-critical asset. Accordingly, disclosure should focus on the material information that a reasonable investor needs to make informed investment and voting decisions although this is not a simple task.  According to Chairman Clayton, the historical approach of disclosing only the costs of compensation and benefits often is not enough to fully understand the value and impact of human capital on the performance and future prospects of an organization.

Chairman Clayton expressed his view that to move the SEC’s disclosure framework forward the SEC should not attempt to impose rigid standards or metrics for human capital on all public companies. Rather, investors would be better served by understanding the lens through which each company looks at its human capital. Relevant questions to ask are: what questions do boards ask their management teams about human capital and what questions do investors—those who are making investment decisions—ask about human capital? For example, how do investors use human capital information to make relative capital allocations among similar organizations? Armed with general and sector-specific answers to these questions, the SEC can better craft rules and guidance.