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The Role of Talent Intelligence in SEC Human Capital Disclosure

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At the tail end of 2020, the SEC (Securities and Exchange Commission) released new rulings to modernize disclosures. When sharing the news, SEC Chairman Jim Clayton shared, “I am particularly supportive of the increased focus on human capital disclosures, which for various industries and companies can be an important driver of long-term value.”

Per, the previous SEC ruling required simply one item when it came to human capital: the number of employees. As time moved on, the SEC realized that these rulings were woefully inadequate and outdated. Thus, the work began to modernize them.

The New SEC Human Capital Disclosure Ruling

For the full text of the new rulings, view the PDF file here.

Key Takeaways

  • The SEC is requiring human capital disclosure so long as that data is material to understanding the registrant’s business.
    • “We believe that, in many cases, human capital disclosure is important information for investors. Human capital is a material resource for many companies and often is a focus of management, in varying ways, and an important driver of performance…We emphasize that these are examples of potentially relevant subjects, not mandates.”
  • The SEC is not adopting a definition of human capital. This will allow the term to adapt as it needs to for individual circumstances. 
    • “…This term may evolve over time and may be defined by different companies in ways that are industry specific. This approach is consistent with the view expressed by a number of commenters that noted that there are many definitions of human capital and that the concept, while generally well understood, is often tailored to the circumstances and objectives of individual companies.”
  •  The SEC is not including prescriptive requirements for these disclosures.
    • “…We did not include more prescriptive requirements because we recognize that the exact measures and objectives included in human capital management disclosure may evolve over time and may depend, and vary significantly, based on [various] factors…”

In the aforementioned article from David Vance, “Although the SEC decided against a prescriptive approach for human capital, it has stated that it expects to see human capital disclosure around employee attraction, development and retention, at a minimum. So, no specific metrics are offered, but the SEC has provided pretty clear direction.”

What The SEC Human Capital Disclosure Rules Mean for Organizations

In addition to the data itself, companies will want to contextualize that information. This will better serve the needs and questions of their investors. Metrics like workforce cost, turnover rate, diversity rate, leadership trust, time to fill, and more are all a possibility. Again, the SEC has not prescribed particular data to respect the needs of companies and investors.

The main task that companies are facing is deciding what to disclose. These rulings rely massively on materiality. Think to yourself, “Would an investor find this data important in making an investment decision?” If the answer is yes, report on it.

PwC shared some potential resources to help companies make this critical decision including the International Organization for Standardization and the Sustainability Accounting Standards Board.

Companies should also be expecting these rulings to update and change. While the SEC is slow-moving, never underestimate the power of the collective decision. As more companies adjust what they disclose, other companies will feel the pressure to do the same. Now is the time to decide whether you want to be a leader in transparency or if you want to wait to follow the tide.

How Talent Intelligence Will Help

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Talent intelligence is data that is collected, contextualized, and analyzed regarding talent to help organizations effectively use that data in their recruiting efforts.

Collecting data is wonderful, but unless your organization converts that data into Talent Intelligence by contextualizing it and analyzing it, it won’t build the stories that your team needs to be successful.

Using Talent Intelligence for SEC Disclosures

With Talent Intelligence’s strength with data, it’s the perfect partner for your SEC disclosure needs. It will be up to you and your team to decide what to disclose. Talent Intelligence will pull together the data to be transparent with your investors.

HiringSolved not only simplifies the recruiting process. It brings clarity and transparency to the candidate data that your team has accumulated. Real-time insights allow teams to understand everything from the diversity rate of a pipeline to job history to common experience and skills.

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Ultimately, the SEC rulings are reflecting the new world of work that we’re seeing grow every day. As people become more invested in transparency companies will need to provide the clarity that investors, employees, and customers need. Transparency builds trust and talent intelligence helps you cultivate that transparency in seconds.