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Investors, lawmakers say HR data should be public

Large investors argue that HR data on diversity and even engagement is critical to understanding the risks that public firms face. They want the data standardized and published.

Demand for specific HR data may add to an HR manager's growing to-do list. Investors and lawmakers are calling for public firms to release employee demographics data, including racial and gender data, absenteeism rates and even engagement scores. To make this happen, HR managers may have to standardize data to make it comparable from firm to firm.

Large institutional investors, such as firms that manage pension funds, believe HR data metrics are as important as financial data. Human capital metrics are key to understanding the health of a company. The U.S. Securities and Exchange Commission has been considering disclosure rule changes. It has been collecting comments from investors, HR groups and others with a stake in this issue for nearly a year.

"Human capital is a primary source of value creation for modern firms," wrote Corey Klemmer, director of corporate engagement at Domini Impact Investments LLC in a letter to the SEC. The investment group wants to know how human capital is being "managed, maintained and grown," she wrote.

Democratic lawmakers are also making a push for more HR data from public firms. "Human capital is among a company's most valuable assets," wrote U.S. Sen. Mark Warner (D-Va.), in a letter to the SEC. How companies invest in their workers and their training has a direct impact on a firm's performance, he argued.

Warner is sponsoring disclosure legislation in the Senate. It's modeled after a similar House bill by the U.S. Rep. Cindy Axne of Iowa. The Democratic-led effort to make more HR data public may not succeed this term, but the issue is not going away.

Demand for HR data has been building

Demands for environmental, social and governance (ESG) data, has been building for years. Public companies are paying more attention to ESG data as well. The question is how much of it should be public.

Firms are keeping track of ESG data because of this growing interest, said Steve Seelig, executive compensation counsel at advisory firm Willis Towers Watson, which has its U.S. headquarters in Arlington, Va.

"We're absolutely in a time of change," Seelig said.

In recent years, some tech firms have published more HR data, including racial and gender makeups. "It may be that these issues are dealt with by companies before ... regulators require them to show disclosures," he said.

This is a customer issue for a lot of companies, and the pressure is coming from them as well.
Steve SeeligExecutive compensation counsel, Willis Towers Watson

"This is a customer issue for a lot of companies, and the pressure is coming from them as well," Seelig said.

What kind of HR data the SEC may require of companies under President Trump's administration is unclear. 

Elad Roisman, an SEC commissioner and Trump appointee, expressed reservations about requiring public disclosure of this data.

"This type of mandated disclosure is often fraught with subjectivity and agendas that are often unrelated to investor welfare," he said in a July 7 speech at the Society for Corporate Governance's National Conference.

Firms pick and choose the HR data they release to the public, something noted in a new report this week by the U.S. Government Accountability Office (GAO).

Some companies reported their employee demographics "using broad groupings, such as 'minority' or 'ethnically diverse,'" while others reported by specific racial or ethnic groups, the GAO report noted.

Some investors want much more.

The California State Teachers' Retirement System, for instance, which manages some $250 billion, wants public firms to release "engagement index scores -- percentage of positive opinions" as well as absenteeism rate. 

The federal government releases engagement scores for its 2.2 million civilian workers annually.

If all public firms were required to publish diversity data, "I honestly don't think it will tell us more than we already know from public data on the workforce as a whole," said Virginia Harper Ho, associate dean for international and comparative law at the University of Kansas School of Law. "Plus, the information will only be coming from public companies, which are only a fraction of our country's employers." 

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