A suite of corporate governance reforms proposed by the UK government will not require companies to have employee representatives on their boards after all. A slimmed-down version of the proposed revisions to the UK Corporate Governance Code, just issued by the Financial Reporting Council, instead proposes to require “the adoption, on a ‘comply or explain’ basis, of one of three employee engagement mechanisms”: a director appointed from the workforce, a formal workforce advisory council, or a designated non-executive director.
The revisions will not mandate direct employee representation on boards, as Prime Minister Theresa May had briefly suggested last year, but will start putting pressure on organizations to devise their own ways of making employees’ voices heard in the boardroom. This will give businesses the flexibility to design the right solution for their organization, Rob Moss reports at Personnel Today:
Peter Cheese, chief executive of the CIPD, said: “This is a significant step forward in recognising the value of the workforce and the need for its voice to be heard at board level. The FRC rightly recognises that in order to drive sustainable culture change and build trust in business, boards must focus more on values, behaviours and a wider stakeholder voice beyond that of shareholders, with particular attention to the voice of the workforce.”
The Human Capital Management Coalition (HCMC), a group of 25 institutional investors with more than $2.8 trillion in assets under management, has petitioned the US Securities and Exchange Commission to enact a rule that would require companies to disclose details about their human capital management in their reports to shareholders, David McCann reports at CFO:
The group did not define any specific metrics that it wants to be reported, instead offering nine broad categories of information deemed fundamental to human capital analysis as a starting point for dialogue:
- Workforce demographics
- Workforce stability
- Workforce composition
- Workforce skills and capabilities
- Workforce culture and empowerment
- Workforce health and safety
- Workforce productivity
- Human rights
- Workforce compensation and incentives
At present, public companies are not required to disclose anything about their human capital other than their number of employees, unless you count the requirement to reveal the compensation paid to top executives. Investors don’t even know how much money a company spends on its workforce each year.
The HCMC’s proposal is in keeping with a trend we’ve observed in our recent research at CEB (now Gartner) of investors taking an increasing interest in talent issues: Earlier this year, we released our Investor Talent Monitor (which CEB Corporate Leadership Council members can read in full here), showing that among the 900 largest companies in US equity markets, the percentage of organizations talking about talent on investor calls increased from 55 percent to 70 percent from 2010 to 2016. Culture and recruiting were the most common talent topics brought up on these calls, but other issues, like diversity and inclusion, are also subject to growing attention from investors.