Brown, Warner Press SEC to Act on Workforce Management Disclosure

WASHINGTON, D.C. – Today, U.S. Senator Sherrod Brown (D-OH), Chair of the Senate Committee on Banking, Housing, and Urban Affairs, and Senator Mark Warner (D-VA), a member of the Banking and Housing Committee, urged Securities and Exchange Commission (SEC) Chair Gary Gensler to act quickly on new rules to improve human capital disclosure by public companies. The SEC’s fall 2023 regulatory agenda suggests the “Human Capital Management Disclosure” proposed rule is likely to be delayed, leaving investors and savers with insufficient information about how companies invest in their most critical asset – their workers.

“As the Commission moves forward, we ask you keep in mind that a robust human capital disclosure rule must require companies to release information regarding the numbers of full-time, part-time, and contingent workers, as well as the compensation provided to each of these groups. Investors deserve transparency about whether corporations choose to invest in their people, or rely on underpaid contingent workers in pursuit of quick profits. Short-term thinking hinders workforce investment, increases rates of turnover, and negatively impacts long-term productivity,” wrote the Senators in their letter to SEC Chair Gary Gensler. “Honoring the dignity of employees’ work is not just a moral imperative, it also has material implications for companies’ bottom lines.”

In September, Senators Brown and Warner reintroduced the Workforce Investment Disclosure Act, legislation to require public companies to disclose workforce management metrics, including investments made in skills training, workforce safety, and employee retention. The Senators have also urged Chair Gensler to require companies to report on workers who are classified as part-time, independent, or subcontracted, in order to give investors a clearer picture of their workforce.

A copy of the letter can be found here and below.

Dear Chair Gensler:

We write to urge the Securities and Exchange Commission (SEC) to act quickly to issue new rules to improve disclosure of human capital information by public companies. We have previously written to encourage the SEC to pursue rulemaking on this critical issue, and we recently reintroduced S.2751, the Workforce Investment Disclosure Act, which would require issuers to disclose information on workforce management policies, practices, and performance.

We were disappointed to see that the SEC’s recently released fall 2023 regulatory agenda suggests the release of a proposed rule on “Human Capital Management Disclosure” is likely to be delayed. We urge you to act expeditiously to bring an improved human capital management disclosure proposal to a vote before the full Commission. We also ask you to ensure that the proposal requires disclosure of companies’ use of temporary and contract workers, employee turnover data, information on employee compensation and benefits, workforce health and safety information, and demographic data. The disclosure of this data is vital to help investors understand how companies treat their most critical asset – the workers.

When you testified before the Committee on Banking, Housing, and Urban Affairs in September, you indicated that a revised human capital disclosure rule was still in development, but that it was necessary to first thoroughly examine the data from the 2020 human capital disclosure rule issued under the preceding SEC Chair, and to ensure that any proposed requirements on workforce and turnover data are properly targeted. But most public companies have now filed annual reports under the 2020 rule for three years. These filings provide sufficient data to determine how companies have responded to the current human capital disclosure rules, and it is clear that those rules are not working. A survey of 2022 company annual reports found that only:

• 17% of companies included a quantitative breakdown of the number of full-time versus part-time employees the company employed;
• 23% of companies included data on employee turnover rates; and
• 12% of companies provided quantitative data on the pay gap between employees in different demographic groups.

The requirements of the current rule are too limited and vague to produce informative, material disclosure on companies’ workforce investment. These shortcomings must be addressed in the upcoming proposal, which should be issued without further delay.

As the Commission moves forward, we ask you keep in mind that a robust human capital disclosure rule must require companies to release information regarding the numbers of full-time, part-time, and contingent workers, as well as the compensation provided to each of these groups. Investors deserve transparency about whether corporations choose to invest in their people, or rely on underpaid contingent workers in pursuit of quick profits. Short-term thinking hinders workforce investment, increases rates of turnover, and negatively impacts long-term productivity. Honoring the dignity of employees’ work is not just a moral imperative, it also has material implications for companies’ bottom lines.

Likewise, requiring companies to disclose key workforce management metrics, including investment in skills training, workforce safety, and employee retention, would provide investors with a clearer picture of how public companies are managing, supporting, and investing in their workers – factors that significantly influence a company’s ability to innovate and compete in the long-term. 

American workers and investors both deserve complete and transparent disclosure on these issues. We ask that the SEC move forward with a revised human capital disclosure rule as quickly as possible.

We thank you for your attention to this important matter.

Sincerely,

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