As many of you may know, SEC Institute\u2019s Associate Director Bob Laux, who is instrumental in making SECI\u2019s Midyear and Annual Forums such great programs, actually wore two professional hats for many years.\u00a0 In addition to his position at SECI, Bob was\u00a0also the North American Lead of the International Integrated Reporting Counsel. \u00a0With this wealth of experience Bob helps us all understand more about integrated reporting and how it is more than just \u201cESG\u201d disclosures, this proposed addition to S-K Item 101(c), in the SEC\u2019s August 9, 2019 proposed rule to modernize certain parts of Regulation S-K, caught our attention:<\/p>\n
A description of the registrant\u2019s human capital resources, including in such description any human capital measures or objectives that management focuses on in managing the business (such as, depending on the nature of the registrant\u2019s business and workforce, measures or objectives that address the attraction, development, and retention of personnel).<\/p>\n
Here are some of Bob\u2019s thoughts on this issue:<\/p>\n
This proposed change is a perfect example of moving beyond the traditional reporting model to a more complete reporting model.\u00a0 As described in The Conference Board Report, “The Emergence of Integrated Reporting”<\/a>:<\/p>\n Over the last 30 years, intangible assets have moved from 20 percent to over 80 percent of the value of public companies, yet decision making within companies has failed to keep pace. Financial reporting has made even less progress in addressing these changes.\u00a0As they take ESG impacts ever more seriously, US investors are urging management and the board to adopt a reporting method that accounts for both tangible and intangible assets. \u201cIntegrated reporting\u201d is such a method: it provides a framework that highlights all the ways a company creates and will continue to create value.<\/p>\n \u00a0For instance, human capital \u2013 people\u2019s competencies, capabilities, experience, and motivation to innovate \u2013 is often the most significant asset an organization has as business models become centered on people and technology.\u00a0 The SEC rule proposal is consistent with the concept of integrated reporting and previous comments from SEC Chairman Jay Clayton, where he indicated:<\/p>\n Today, human capital and intellectual property often represent an essential resource and driver of performance for many companies.\u00a0 This is a shift from human capital being viewed, at least from an income statement perspective, as a cost . . . I think investors would be better served by understanding the lens through which\u00a0each company looks at their human capital.\u00a0 \u00a0Does management focus on the rate of turnover, the percentage of their workforce with advanced degrees or relevant experience, the ease or difficulty of filling open positions, or some other factors?<\/p>\n As always, your thoughts and comments are welcome!<\/p>\n","protected":false},"excerpt":{"rendered":" As many of you may know, SEC Institute\u2019s Associate Director Bob Laux, who is instrumental in making SECI\u2019s Midyear and Annual Forums such great programs, actually wore two professional hats for many years.\u00a0 In addition to his position at SECI, Bob was\u00a0also the North American Lead of the International Integrated Reporting Counsel. \u00a0With this wealth … Continue reading Disclosure Modernization and Integrated Reporting<\/span>