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More and More Investors Asking for Human Capital Data

Rising numbers of mainstream investors are now requesting companies brief them on a raft of data about employees and how they are managed

This summer, the Human Capital Management Coalition, an investor group with more than $2.8 trillion in assets under management (AUM)petitioned the US Securities and Exchange Commission (SEC) to require public companies to disclose information about the way they manage their workforce. The petition didn’t specify which measures investors were particularly interested in, but did list nine broad categories of data including the demography of the workforce, their skills and capabilities, and company culture.

The petition is part of a broader trend. Recently, 75 “megacap” companies received a survey asking for information on workforce composition, training, and engagement from the ShareAction-led workforce disclosure initiative (representing $7.9 trillion in AUM). Black Rock CEO Larry Fink’s annual letter to chief executives urged them to disclose more details about their long-term strategy, including talent development plans (the asset management firm represents more than $14 trillion in AUM).

This concerted push from major investors is certainly one explanation for the multitude of efforts to measure and standardize human capital information led by organizations like the International Integrated Reporting Council, the Global Reporting Initiative, and the International Organization for Standardization.

Early Days

Despite all the interest, we are still in the early days of making human capital data available to investors. Companies, academics, and NGOs are still working on sufficiently accurate measures of these kinds of intangible factors. Investors, too, are still figuring out how to use this information before engaging with every single company about it. But just because there’s still a lot of work to do doesn’t mean that investors won’t ask about this information during regular interactions with executives and investor relations teams.

Studies have already shown that there’s a correlation between human capital management and financial outcomes like return on equity, return on investment, profit margins, and Tobin’s Q. A Harvard Law School Pensions and Capital Stewardship Program review of 92 empirical studies (pdf) concluded that, “there is sufficient evidence of human capital materiality to financial performance to warrant inclusion in standard investment analysis.”

As more investors become aware of studies like this, and as measurement methodologies improve, the number of requests for human capital information is bound to increase. This is already starting to happen — analysis of earnings calls revealed that in 2016, 61% of the world’s 1,600 largest companies by market capitalization talked about talent management with investors, a 13% increase compared to 2010 (see chart 1).

Charlie Crossley, a Project Officer at ShareAction, explained to CEB that his organization has seen this pattern first-hand. “We have noted significant appetite from investors to engage with companies on how they manage their people,” he said. “This data is in demand for informing engagement, improving long-term understanding of companies, and ultimately integrating into investment decision-making. Investor, and regulatory, scrutiny is only set to increase,” he added. And, as a case in point, BlackRock listed human capital management as one of its top five engagement priorities for 2017-2018.

Chart 1: Conversations around talent in earnings calls are increasing  Percentage of companies discussing talent in earnings calls per year  Source: CEB analysis; AlphaSense (accessed January 2017),

Note: Searches were limited to the use of the terms in a talent management context and included synonyms and synonymous phrases of the terms. Search parameters were limited to earnings calls released from 1 January 2010 to 31 January 2016 from publicly listed companies in the S&P Global 1200 and S&P MidCap 400 indices as of 31 December 2016.

Questions to Ask Before Your Next Investor Interaction

So it’s clear that this is something investor relations teams, CFOs, and others need to keep on top of. There are five questions that can help.

  1. How material is talent to your business? Talent is obviously important to every organization, but the level of criticality will vary. For example, many healthcare, hospitality, and technology organizations probably consider talent a source of competitive advantage, but most manufacturing companies probably don’t. Look to the Sustainability Accounting Standards Board’s Materiality Map for further guidance.

  2. What are your investors’ main talent concerns? Review the proxy voting guidelines and environmental, social, and governance (ESG) policies of your top investors. Then ask questions during one-on-one engagements and analyst days to learn more about their reporting expectations and the most common data and ranking providers they use. Try to understand how they intend to use talent data and how important this data is to their investment decisions.

  3. What data do you already have? Meet with the head of HR to discuss the metrics your company is already tracking, and ones that ongoing talent analytics initiatives will soon make available. How would he or she answer these questions from the Human Capital Management Coalition? What kind of information would he or she feel comfortable sharing with investors?

  4. What is your talent narrative? Investors want more than just data; they expect to hear the context around the numbers as well. For example, 20% turnover among management in one year is exceedingly high, whereas 20% turnover among call-center staff isn’t as problematic. Be prepared to share qualitative information during investor interactions such as how your firm compares to the industry average, or why a particular number has increased or decreased over time. When presenting human capital data to investors, think about how your “talent story” fits into the overall corporate narrative.

  5. Are you managing requests for talent data efficiently? As investor interest grows, you may start feeling overwhelmed by the number and variety of requests you receive. Document and analyze them to streamline your responses as much as possible. Also keep track of the data you’ve previously shared and explain any discrepancies in your reporting over time to maintain credibility. See how one medical device company in CEB’s networks formally tracks progress against commitments it has made to investors.

The Intersection of Talent and Growth

Even if SEC guidelines don’t change anytime soon, better talent data and the analysis of it, will help companies unlock their potential for growth by improving the management of their workforce.

Over the past couple of decades, markets have disproportionately rewarded companies that have driven shareholder value via “efficient growth”—the ability to consistently demonstrate revenue and margin improvements across business cycles – which is achieved by making bigger, riskier, and more consistent growth bets. There are four main “anchors” that prevent big growth bets becoming a success, and all of them depend in part on intelligent talent management (see chart 2).

Chart 2: The four growth anchors  n=103 companies  Source: CEB analysis


More On…

  • Efficient Growth

    Learn more about CEB's work on the few companies that outperformed their peers across the past 20 years.

One Response

  • Dee says:

    A group of 25 institutional investors is petitioning the Security and Exchange Commission (SEC) to mandate more reporting on employees by public companies, CFO reports. The Human Capital Management Coalition (HCMC) is asking SEC to require more reporting on practices, policies and performance in order to track the connection between human capital data and stock market performance.

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