Variety of Approaches to New Human Capital Resources Disclosure in 10-K Filings | Harvard Law School Forum

The Security Exchange Commission (SEC) recently introduced new disclosure requirements for public companies to describe how they manage their human capital (HC) resources in their upcoming annual reports. The rule, which went into effect on November 9, 2020, gives firms 60-90 days after the end of their fiscal year to include this HC information in their annual report. Since the SEC has given organizations broad latitude to choose which measures to include, many firms are grappling with which HC information to measure and disclose. This analysis by Harvard Law examined the HC components of the first fifty 10-Ks filed after November 8 by registrants with a greater than $1 billion market capitalization. They found: word length varied dramatically, ranging from 9 to 1,582 words, and a median of 369 words. Thirteen HC themes are collectively covered, including the top three:  1) Extensive headcount data (60%), 2) Diversity and Inclusion (54%), and 3) Employee Development and Training (50%). Excerpts of HC disclosures are provided. It will be interesting to see if the SEC provides more specific guidelines for standardizing how companies define and calculate certain HC measures (e.g., employee turnover). Such a practice provides greater utility to investors when deciding to invest in one company over another—a premise on which the ruling is based.