Beyond the SEC’s Human Capital Disclosure Rule

April 6, 2022

2 min read

April 6, 2022

2 min read

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This post was originally published by Fortune.

On Nov. 9, 2020, a new regulation from the Securities and Exchange Commission (SEC) went into effect, requiring publicly held U.S. companies to greatly expand the data they provide about their workforce. Before, companies could share minimal details, such as their number of employees. However, under the new human capital disclosure rule, companies will be required to include metrics on things like employee demographics, training and development, and employee retention—all with the goal of showing the progress they are (or aren’t) making. The SEC’s actions are part of a broader trend toward greater disclosure of human capital data: regulations in Asia and Europe, for instance, have been moving this direction for several years already. This new rule is intended to give stakeholders insight into a company’s operations, and a key component of that is the way the company manages its employees.

While the details about what information will ultimately be required are still murky, one thing is clear: Companies are increasingly being held accountable for how they manage their people.

The shift to a human-centric work culture

Organizations today are undergoing radical transformations, driving a fundamental reevaluation of how they build, engage, motivate, develop, and retain their workforces, says Scott DussaultOpens in a new tab, chief financial officer at Workhuman, a multinational company that provides cloud-based, employee recognition and continuous performance development software. “These transformations are fueled by several powerful factors, including generational demographic shifts, social movements, globalization, technology enablement, and regulatory changes. At the same time, businesses are driven to meet growth and financial performance objectives. But to meet those goals, they must find ways to align with the professional and personal objectives of their employees.”

As a result, companies are shifting to a human-centric work culture, in which community, diversity, inclusion, transparency, and empowerment are fundamental to managing a high-performing workforce. “Getting this right is the single most important factor driving employee engagement and organizational success,” says Dussault.

Making the shift to a human-centric work culture requires intention, but it can be done: Simple acts of connection, recognition, and reward can positively impact corporate culture. And solutions like those provided by Workhuman help organizations make a necessary shift toward improving the employee experience and promoting employee engagement and collaboration, Dussault adds: “Our platform is designed to benefit both employers and employees, allowing our customers to align cultural and business objectives across the entire organization.”

SEC rule: Another sign of the employee-relationship shift

The SEC rule will be instrumental in shifting the mindsets of companies to a more human-centric work culture. Some companies may already disclose qualitative information about their company culture, values, diversity and inclusion initiatives, employee survey results, pay equity, total rewards, and retention practices—but now, public companies will have to back up that qualitative information with quantitative metrics. “They now need to open their book on how they value their employees, and it can’t be lip service,” says Dussault. Investors, customers, job candidates, and current employees can use that data to assess the ways that companies value their workforce—and make investment, buying, and employment decisions based on those assessments.

Not all companies will have stellar metrics right away. But even for those that don’t, the data provides a blueprint for areas to improve. Although private companies are not subject to the SEC ruling, they will be encouraged to focus on their people in order to stay competitive with public companies, Dussault says.

Companies will increasingly look at human capital data as mission critical, just as they do with customer data, Dussault explains. Companies are realizing that without their employees, they wouldn’t have customers, so the workforce needs to be treated as equally important, he says: “This change will go beyond an SEC disclosure requirement for companies. It’s going to truly impact culture.”

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