This complimentary report provides workforce productivity and ROI benchmark analysis of 41 of the top 50 banks listed in North America between 2012 to 2019. FOR THE FULL REPORT Download this complimentary report here. KEY TAKEAWAYS Labor costs are the single largest operating expense driving the cost-to-income-ratio (CIR) banking metric Advanced metrics and measures used in the study link workforce investments to revenue and market value Top 5 bank “Winners” grew in market cap by $20.5 Billion per bank on average vs flat market value for the others In 2019, the gap between the top and bottom quartile banks increased by 33%. Prior studies suggest talent management decisions before, during and after financial crises significantly impact the likelihood and speed of recovery from COVID-19 EXECUTIVE SUMMARY Workforce related expenses have been both the single largest contributor to non-interest expenses and the main driver behind rising operating expenses for all bank in recent years. Therefore, it’s important to understand the impact of human capital on business performance. Between 2012 and 2019, the Banking sector in North America saw a large improvement in Revenue per FTE and Profit per FTE. However, this development has not been accompanied by improvement in cost-based measures of workforce productivity such as Human Capital ROI Ratio and Total Cost of Workforce per FTE. Sector “winners” clocked an average of 5.4% productivity gains over the last 7 years and can be found in all sub-category within the Banking sector. And the gap between sector “winners” and “laggards” has also been widened. Within the sector, there are a few sector’s subcategories that clearly led the industry in terms of workforce productivity. While the COVID-19 pandemic deeply affected the banking sector, many studies have pointed out how talent management decisions before, during and after financial crises can significantly impact banks’ likelihood and speed of recovery. For more details, click here to download the full complimentary report. Recommended Reading Linking Human Capital to Business Performance Whitepaper - Link

As the local and global economies begin to open up in different shapes and at varying speeds businesses of all types will face new Workforce Planning challenges. How will your organization navigate a difficult environment over the next several weeks and months as restrictions are loosened? What workforce risks should be considered? A combination of strategic and tactical Workforce Planning can address a multitude of talent risks related to the uncertainty of the economic restart. Watch this webinar to learn the most effective ways to use Workforce Planning to jumpstart your people operations during the post-COVID-19 recovery: (1) Workforce Planning risks and difficulties in economic restart (2) The role of scenario modeling in Workforce Planning (3) Example: building a high-level workforce plan for an economic restart Webinar Slide Deck Download the presentation slide deck here About the Presenter Stephen Weltz Workforce Analytics Manager, HCMI As a workforce analytics consultant at HCMI, Stephen specializes in synthesizing, analyzing and visualizing seemingly disparate data sets to uncover key workforce insights that link to business results. Stephen combines experience in workforce analytics applied statistical analysis, and organizational research to help companies make better data-driven decisions. Prior to working at HCMI, Stephen was an organizational consultant for one of the largest hospitals in California, helping to research leadership and team level best practices to inform future workforce development. He has since worked with companies in the Financial, Biotechnology, Oil and Gas Professional Services, and Non-Profit sectors. Stephen holds an M.A. in Organizational Behavior and Evaluation from Claremont Graduate University. To see more client successes, innovative thinking and practical advice about Workforce Analytics and Planning, visit HCMI's Learning section

Today every company faces difficult workforce decisions in dealing with the COVID 19 pandemic. Agile organizations are able to strategically realign their workforce now to reduce spending while maintaining their most critical roles for a quick pivot when the business environment improves. Sign up for this webinar to see the steps your company can take to become an agile organization. The following topics will be discussed: ✔️ The importance of workforce realignment planning during the COVID 19 pandemic ✔️ 8 steps to create your own workforce realignment plan ✔️ Example: Creating a pandemic workforce realignment plan in 14 days Webinar Slide Deck Download the presentation slide deck here About the Presenter Jeff Higgins CEO & Founder, HCMI Jeff is a global thought leader with 25 years combined workforce planning, analytics and finance experience supporting Fortune™ 500 companies. Jeff has helped organizations around the world quantify the ROI of workforce decisions and realize cost saving opportunities of up to $1.0 billion USD. Jeff is both a former senior HR executive and former CFO, and a regular speaker at HR events. Previously, Mr. Higgins worked in finance at Johnson & Johnson, Colgate Palmolive, Klune Industries and a senior HR leader at Countrywide Financial, IndyMac Bank, and Inform, a leading analytics software co. Jeff is on the SHRM Global Standards Committee on human capital, the Center for Talent Reporting board and founding member, PwC Saratoga Institute advisory council. To see more client successes, innovative thinking and practical advice about Workforce Analytics and Planning, visit HCMI's Learning section

Listen to this Council of Institutional Investor's Podcast with Jeff Higgins, where he discusses ISO's Human Capital Reporting Standard. Listen to the podcast here.

What if human capital could be valued and its contribution quantified in the form of productivity or return? What if the return on human capital could be definitively linked to business results? While intriguing, these questions are largely muted by the fact that no clear formulas or standards have existed upon which organizations could rely, for answers. Yet, why do standards for HR and Human Capital matter? Aren’t existing reporting requirements enough? More to the point, why does ISO 30414 Human Resource Management - Guidelines for Human Capital Reporting for Internal and External Stakeholders matter? Why should organizations invest time and money to quantify the value of their human capital and report on their performance? ISO (the International Organization for Standardization) is a worldwide federation of national standards bodies (ISO member bodies) across more than 150 countries. ISO standards adhere to the World Trade Organization (WTO) principles in the Technical Barriers to Trade (TBT). ISO#30414 was prepared by ISO Technical Committee ISO/TC 260, Human resource management. ISO 30414 Human Resource Management - Guidelines for Human Capital Reporting for Internal and External Stakeholders is the world’s first global standard focused specifically on how to measure and report human capital both internally and externally(disclosure) for both small and large organization organizations. To answer this, it is key to understand the fundamental changes impacting the way work is done. The rise of the computer, software, internet, big data and other technology has forever changed the way organizations operate, with economies shifting from industrial-driven to technology and services-driven. This can be proven simply by listing the top five most valuable companies in the world today; Apple, Amazon, Alphabet (Google), Microsoft, Facebook, only one of whom existed 20 years ago, while none existed 40 years ago. Therefore, in today’s services, data and internet driven world, most would agree that finding, hiring, motivating and retaining top talent has become more critical to success and more difficult to achieve ever as tech worker costs continue to increase. There is near universal clarity and agreement that human capital has an impact on organizational success. On this broad strategic point, the investment community, Boards of Directors, CEOs, CFOs, management, governments, Human Resources and workers themselves agree. There is also significant evidence supported by research, showing the effects of human capital upon financial performance. The research is echoed by CEOs of leading global organizations who often say people are their most valuable assets and source of competitive advantage. All agreement ends however, when questions of how to properly reflect the importance of human capital, typically in terms of reporting and disclosure, come up. Yet between company management and investors, , it would seem that investors/owners will get their way and therefore it may be valuable to better understand their perspective. The Investor and Capital Markets Perspective The existing gap in human capital reporting has made it impossible for investors and other groups to fairly assess true workforce impact and the effectiveness of management regarding human capital as exemplified by quotes from various investment and capital markets organizations. This is why many investor groups have banded together in coalitions to more effectively push for change. According to the Embankment Project for Inclusive Capitalism (EPIC) formed by the Coalition for Inclusive Capitalism in 2017, and made up of 32 companies, asset managers and asset owners, with approximately USD 30 trillion of assets under management, this conflict and gap can be highlighted thusly: “If businesses want to prepare for a rapidly changing future, they might want to invest in employee training or innovation programs – even though that means they have lower dividends or short-term profitability. However, without a clear way to measure and communicate to investors why these trade-offs will pay off in the long term, many businesses feel compelled to put them off or avoid them entirely. And when businesses stop investing in the future, our entire economy suffers.” Embankment Project for Inclusive Capitalism (EPIC) “The fact is, the best businesses are defined by more than their short-term profitability. They drive broad-based prosperity by creating value for shareholders, customers, employees, and society alike. When they invest in giving employees the most in-demand skills, for instance, it is clearly good for their business.” - Larry Fink, Blackrock CEO, the world’s largest asset management firm “The people who constitute a company’s workforce are in many cases a firm’s most valuable asset - indeed this view is ascribed to regularly by many companies. However, all too commonly they are viewed and reported as a cost.” - Where is the Workforce in Corporate Reporting?, National Association of Pension Funds UK Limited© (NAPF) White Paper, June 2015 As institutional investors and markets increasingly press to see more information on effectiveness of talent deployment in organizations they invest in, they have firmly acknowledged Human Capital, as a major source of value creation, customer satisfaction, productivity, risks, innovation, and more. 6 Reasons Standards Human Capital Matters: Companies need smart, effective employees to compete, so understanding and quantifying human capital is critical for success and future growth internally within the organization. There is broad agreement by investors, Boards of Directors, CEOs, CFOs, governments, Human Resources and workers that human capital has an impact on organizational success. CEO’s state “Our people are our most valuable asset,” or “It all starts with people.” Shouldn’t such valuable asset information be disclosed to key stakeholders. The current disclosure gap obscures talent management effectiveness and material human capital risks to investors. With no visibility into utilization of a firm’s single largest expense, investors must rely on social media tidbits or simply make judgements on no information at all. Organizations have a fiduciary duty to communicate existing and potential future risks deemed material to their business. Human Capital is clearly material to virtually any organization’s current and future success, therefore a fiduciary responsibility exists to provide greater information to shareholders, creditors and others. What gets measured gets managed. For most organizations, human capital is not well measured except as a cost. This suggests unbalanced reporting with only the cost side of the equation represented and the value-add investment side missing. Regulatory securities commissions, require extensive disclosure of all major assets including financial assets, physical assets, and technological assets such as patents. However, there is minimal disclosure of human capital which is, for most organizations, their largest annual operating expense. According to Deutsche Bank’s Cross discipline research report “Valuing Human Capital”, dated February 13, 2019, as they conducted a deep dive into the accounts of individual European stocks. The result was a surprising relationship between Human Capital ROI and subsequent share price movements, Returns on Equity, and a firm’s overall staff costs. “Just one unexpected outcome is that future share price returns are more correlated to Human Capital ROI than they are with a company’s return on equity. Furthermore, we found that firms with different levels of staff costs and Returns on Equity have a very different Human Capital Return on Investment”. Deutsche Bank research report “Valuing Human Capital”, dated February 13, 2019 Standards and Required Disclosure of Human Capital is Already Here The US Securities and Exchange Commission (SEC) recommended in August 2019 as a part of its “Disclosure Effectiveness Initiative” to update listing company disclosure requirements (known as Regulation S-K), to a more principles-based approach. As a part of these changes, the SEC has recommended discussion and disclosure on three primary areas including: human capital talent attraction, human capital development and talent retention (with workforce costs), workforce productivity and employee engagement as secondary areas of focus for discussion and disclosure. Now with the release of ISO global standard (ISO#30414:Dec2018), there are metrics in a clear global standard which organizations and stakeholders alike may utilize to finally begin to answer many of the questions around talent such as: Is the human capital value growing, static or declining? Are leaders doing a good job managing employee engagement, retention and performance? Which organizations are truly great at growing their own talent? Internal vs. External organization Use While much focus has been on external disclosure of human capital reporting information for publicly listed organizations, perhaps the greatest singular value from the completion of the Human Capital Reporting Standard is a vastly improved understanding and insight about its own workforce. Completing the ISO HC Reporting Standard metrics arms an organization with the ability to better measure, manage and optimize their human capital talent. While some aspects of human capital are hard to measure, many other aspects are measured readily, and if the right metrics are combined in a thoughtful, logical flow, insights and a story can emerge regardless of internal vs. external use. While arguments can be made that additional reporting adds compliance costs for organizations, how can organizations legitimately say they are disclosing all ‘material’ business information without providing adequate reporting about their ‘most valuable asset?. In the end, who can argue with the value of better information to measure, manage, and even predict workforce productivity and performance? In the end, who can argue with the value of better information to measure, manage, and even predict workforce productivity and performance? Additional resource: Webinar - Incorporating HR & ESG In Corporate Strategy About the Author Jeff Higgins - HCMI Founder & CEO Jeff is the founder and CEO of the Human Capital Management Institute and creator of the Human Capital Financial Statements (HCF$™) reporting methodology. Jeff is an expert in human capital analytics and workforce planning with 30 years of experience. Jeff is both a former senior HR executive and former CFO, and a regular speaker at HR events. Jeff is a member of ISO HR Standards Technical Advisory Group (TAG) TC260, sponsor of the Human Capital and Reporting Council HC IRC, Board member Center for Talent Reporting

If you are looking for buy-in to a data-driven approach to talent management, then you'll need to be able to tell a compelling story with your workforce data. And the more sophisticated the insights, the more important the story becomes to win business leaders' support. Join our next webinar to learn about critical elements needed to tell a story that engages business leaders: ✔️ How to craft a workforce story that sticks ✔️ The importance of context and pain points ✔️ How to select the best visualizations for your story ✔️ Examples of incorporating storytelling elements into HR analytic findings Webinar Slide Deck Download the presentation slide deck here. About the Presenter Steve Gao Data Scientist, HCMI As a Data Scientist at HCMI, Steve specializes in advanced analytics, algorithmic computing, statistical modeling, and machine learning. Steve is capable of turning vast amounts of data into actionable insights and designing machine learning protocols in the realm of workforce analytics. Steve’s work ranges from predictive turnover algorithms to sentiment analysis using Natural Language Processing (NLP) Prior to HCMI, Steve worked at Deloitte Advisory’s Advanced Analytics Group in industries including finance, oil & gas, and gaming. During his tenure at Deloitte, Steve has contributed to various campaigns to deploy advanced analytics programs in Fortune 100 companies. Steve holds a M.S. in Business Analytics from UCLA. To see more client successes, innovative thinking and practical advice about Workforce Analytics and Planning, visit HCMI's Learning section

Today, more HR data is readily available than ever before both in terms of volume as well as types of data – and plenty of ways to analyze it, too. But finding ROI in HR analytics is not as simple as getting an HRIS system and a team of data scientists together! Unless you have a proper metric infrastructure and business support capability in place, chances are you and your analytics team might get caught up in details and miss the big opportunity for major business impact. Where is Workforce Analytics heading in 2020, and what do you need to set your team for success? Watch our webinar to give your Workforce Analytics initiative a boost, and discover the trends, including: ✔️ How integrating HR data with Finance and Operations data can empower your analyses ✔️ What types of classification frameworks are needed for world-class HR analytics ✔️ The importance of HR data literacy and metric standards ✔️ The emergence of mandatory HR metrics disclosure Webinar Slide Deck Download the presentation slide deck here. About the Presenter Stephen Weltz Workforce Analytics Manager, HCMI As a workforce analytics consultant at HCMI, Stephen specializes in synthesizing, analyzing and visualizing seemingly disparate data sets to uncover key workforce insights that link to business results. Stephen combines experience in workforce analytics applied statistical analysis, and organizational research to help companies make better data-driven decisions. Prior to working at HCMI, Stephen was an organizational consultant for one of the largest hospitals in California, helping to research leadership and team level best practices to inform future workforce development. He has since worked with companies in the Financial, Biotechnology, Oil and Gas Professional Services, and Non-Profit sectors. Stephen holds an M.A. in Organizational Behavior and Evaluation from Claremont Graduate University. To see more client successes, innovative thinking and practical advice about Workforce Analytics and Planning, visit HCMI's Learning section

BY BRETT CHRISTIE, WORLDATWORK Original article here Many United States-based companies are in favor of the Securities and Exchange Commission’s (SEC) proposed rule amendments governing proxy solicitation and would respond to proxy voting recommendations if given the opportunity to do so. This is according to a survey of 105 publicly traded U.S. companies by Willis Towers Watson, which found that 83% of companies believe the regulations, if finalized, will cause proxy advisors to be more transparent. In November, the SEC proposed amendments to its proxy solicitation rules to improve the accuracy and transparency of proxy voting advice. The proposed rule changes would require proxy advisors to disclose any potential conflicts of interest to clients, allow companies to provide feedback on proxy advice (including factual errors) before it is disseminated to institutional shareholders, and permit companies to attach their own hyperlinked statement to the proxy advisors’ recommendations. The survey found that 40% of companies would communicate directly to institutional investors with hyperlinked statements to proxy advisor recommendations if they wanted to provide further communication on their executive pay philosophy. More specifically, 81% would speak up if they found a factual error; six in 10 (59%) companies consider this to be a big problem. Additionally, if companies disagreed with proxy advisor testing methodology, or if they received against voting recommendations, nearly half (46% and 47%, respectively) said they would provide feedback. “We expect companies will welcome the rule changes, if enacted, and take advantage of the opportunities to improve their communication with proxy advisory firms,” said Don Delves, North America head of executive compensation at Willis Towers Watson. “These proposals are, above all, about greater transparency and clarity around pay issues and recommendations. They could go a long way toward eliminating errors and ultimately help shareholders make informed proxy voting decisions.” The poll also revealed that companies and their compensation committees will be placing greater emphasis on people issues over the next few years. This follows an earlier SEC proposal to expand Form 10-K disclosure of human capital measures to enhance shareholder understanding of their importance. “Investors and boards need to be concerned with the risks associated with human capital but also recognize the distinct upside of human capital in driving enhanced and sustainable value,” wrote Scott Cawood, president and CEO of WorldatWork, in an article for the Agenda. More than nine in 10 survey respondents (92%) said managing human capital resources will be important to their success over the next three years, compared to 71% over the past three years. Additionally, nearly three in four respondents (72%) believe their compensation committees will oversee fair pay and gender pay issues in the next three years, compared to 52% that do so currently. More than half (54%) also said their compensation committees will be responsible for inclusion and diversity issues in the next three years, up from 45%, currently. “The ongoing push to embrace inclusion and diversity initiatives and other critical human capital issues, such as fair and gender pay, is clearly having an impact at all levels of organization, and this includes compensation committees,” Delves said. “While they historically oversee total rewards and succession planning programs, some will broaden their focus to include additional human capital elements of culture, reskilling and wellbeing — and their impact on organizational performance.”

Kelli Okuji Wilson Analyst, Project Lead – Human Capital Research Project Original article here SASB’s Human Capital Research Project will identify key human capital management issues to set up potential standard-setting activities In September 2019, the SASB Standards Board approved the Human Capital Research Project as a foundational step towards addressing emerging issues in human capital management. While human capital is one of the most common issues across SASB’s 77 industry standards, incorporating emerging issues, evidence of financial materiality, and evolving market views into SASB’s standard-setting process is paramount for SASB and its commitment to high-quality, timely standards. The research project is part of SASB’s launch of its project-based model, which enables SASB to more agilely analyze and address key issues in the SASB standards. Since human capital is an issue that cuts across many industries, the human capital research project’s objective is to create a market-informed and evidenced-based framework that identifies the financially material impacts of relevant human capital management issues, which will enable the assessment of these themes on an industry-by-industry basis. The framework will form the basis of the SASB Research team’s recommendations to the Standards Board regarding modifications to the human capital sustainability dimension. Some potential issues for exploration include, but are not limited to, the definition of employee (full-time, part-time, contractor, etc.), employee well-being, further exploration of the financial materiality of diversity and inclusion issues, and the impact of technology on workforce skills. Emerging and evolving human capital issues are of growing importance to investors and companies Human capital has long been known as a cost to companies, but more recently, has been recognized as an asset critical to a firm’s long-term value creation. With the rise of technology and shifts in societal values, human capital and the management of this resource have emerged as increasingly important issues to both companies and investors. We discussed the emerging focus on human capital in the financial markets in our recent blog, “Spotlight on Human Capital Has Investors Attention”. Subsequently, the SEC released a proposal on Modernization of Regulation S-K, Items 101, 103 and 105 which, among other topics, proposed potentially including human capital resources as a disclosure topic. On October 17, 2019, SASB submitted a letter of comment, focusing its recommendations exclusively on the SEC taking a principles-based approach versus a rules-based approach to human capital disclosures in the 10-K filing. SASB’s position on the proposal urged the SEC to be clearer in the rule that boilerplate-type disclosures would not fulfill the rule requirement. SASB also noted that in order to promote consistency and comparability in the disclosures, the SEC should, in its final rulemaking release, either strongly encourage or require companies to use a private-sector disclosure framework. SASB believes that its framework, developed through due process, would be particularly useful to companies in fulfilling the rule requirements and the SEC should refer companies to SASB as an acceptable framework for disclosure in its rulemaking release. Human capital in the SASB standards could benefit from further research for possible expansion While human capital is well-represented throughout SASB’s 77 industries, emerging and evolving issues on the theme of human capital have encouraged SASB to escalate research and market engagement focused on the issue. Currently, SASB standards address three relevant, financially material issues related to human capital management (in industries where sufficient evidence of financial impact and investor interest has been demonstrated): employee health and safety; employee diversity, inclusion, and engagement; and labor practices. However, as firms become increasingly exposed to technological innovation combined with broader macroeconomic trends of shifting demographics and changing societal values toward human capital, the reevaluation of the standards in context of these evolving and emerging trends is increasingly important.

Chairman Jay Clayton discussed the importance of human capital as part of company disclosures last week at Finance Dublin's Financial Centres Summit. See more clips here: https://www.financedublin.com/summit/...

Posted by Steve Klemash, Bridget M. Neill, and Jamie C. Smith, EY Center for Board Matters, on Friday, November 15, 2019 Original article here The talent paradigm is shifting. A company’s intangible assets, which include human capital and culture, are now estimated to comprise on average 52% of a company’s market value. [1] At the same time, the nature of work is rapidly evolving, new generations are reshaping the workforce and businesses are redefining long-term value and corporate purpose through a stakeholder lens. In this era of disruption, talent and culture have leapt to the forefront of thinking around enabling strategy and innovation and creating long-term value. Accordingly, human capital has rapidly emerged as a critical focus area for stakeholders. There is clear and growing market appetite to understand how companies are managing and measuring human capital, demonstrated by: Comments received by the U.S. Securities and Exchange Commission (SEC) on human capital matters, as articulated in the August 2019 proposed rule amendments to revise current business disclosure requirements Influential investors like BlackRock and State Street Global Advisors making human capital and company culture engagement priorities Market-driven frameworks such as the Global Reporting Initiative, the Embankment Project for Inclusive Capital and the Sustainability Accounting Standards Board (SASB) identifying human capital as a key value driver Advancing disclosures to keep pace with this transformational view of human capital will be a journey. To better understand where companies are on this journey, we reviewed the proxy statements of Fortune 100 companies to see how leading companies are disclosing their governance and management of human capital. We found that Fortune 100 company proxy disclosures reflect early stage efforts to meet growing demands for better communications around the management and governance of human capital and culture. Two key observations stand out from our analysis and are explored in greater detail. One, many companies voluntarily highlight management’s general efforts around certain human capital issues (e.g., diversity and inclusion or broader workforce compensation). However, these disclosures often do not identify key performance indicators (KPIs) or quantify them. Two, many companies broadly address board oversight of human capital management or culture, and more assign related committee oversight responsibilities, but the depth and clarity of these disclosures vary and may not provide a complete picture of the board’s governance in this important area. Of course, proxy statements are not the only vehicle for human capital or culture disclosures, as many companies disclose such information in corporate social responsibility (CSR) or sustainability reports and other public disclosures that may or may not be filed with the SEC. Proxy statements are, however, an increasingly important tool for shareholder and other stakeholder engagement and a key source of information about the board’s governance philosophy and approach. In addition to outlining key findings from our review of Fortune 100 proxy statements, this report also highlights emerging frameworks and KPIs for measuring and reporting on human capital and culture to help guide companies as they evolve their practices and disclosures. Further, it provides an overview of related regulatory developments and increasing investor engagement on human capital and culture to reflect the continuing role of stakeholders in advancing human capital disclosures. What we found: the current landscape for proxy disclosures on human capital and culture As human capital and culture increasingly become priorities for boards and management, companies and others are in the early stages of identifying the best ways to address this priority, both practically and in disclosures. The workforce is changing rapidly due to technology and increased competition for talent—particularly as talent is more attracted to companies that have a clear purpose, strong culture and respected reputations. As companies navigate these changes, they can benefit and enhance their reputation with stakeholders by examining the activities that can help them attract, retain and motivate the best talent, developing KPIs around those activities and disclosing those KPIs that best indicate value creation or enhancement. Overall, we found that current voluntary proxy disclosures on human capital and culture reflect this emerging stage of development and underscore leading companies’ efforts to proactively and voluntarily address topics of stakeholder interest. We observe opportunity for enhancing these disclosures to provide clarity on how companies are prioritizing human capital and culture as long-term strategic assets, and how board oversight is advancing and protecting related value creation. This is based on our analysis of human capital and culture-related disclosures in the proxy statements of 82 companies on the 2019 Fortune 100 list available as of 5 September 2019. Disclosures relating to human capital and culture programs While proxy statements may not be the primary vehicle for human capital or culture disclosures (which are often included in CSR or sustainability reports), they do communicate the board’s governance approach and are increasingly used as a communication tool around areas of shareholder interest, including human capital. Indeed, we found that many companies voluntarily highlighted commitments to and/or initiatives and goals with respect to human capital and culture. Only a subset of these, however, disclosed any KPIs with fewer quantifying them. The following data and observations reflect the human capital topics, and any related KPIs, most often highlighted by companies. Workforce diversity—Half of Fortune 100 companies highlighted commitments and efforts to enhance diversity and inclusion. Key themes of these disclosures included initiatives to empower women and minorities and bring them into leadership positions, diversity statistics and recruitment goals around diverse talent, employee affinity groups, supplier diversity initiatives, collaborations with diversity organizations, and external rewards and recognition. Just under a third of the companies that discussed workforce diversity provided some measure of workforce diversity data (e.g., percentage of women and/or people of color across the global or US workforce, at the management level, in leadership positions or across incoming hires). Workforce compensation—Around a third of companies highlighted key practices or developments related to compensation of the broader workforce. Most of these companies highlighted pay equity, including efforts to identify and eliminate pay gaps for women and minorities. Other key themes of these disclosures were minimum wage increases and general statements around the company’s compensation approach. Around 40% of the companies that discussed workforce compensation disclosed specific performance data around pay equity beyond the required CEO pay That information generally included the pay ratio for female to male employees, the pay ratio for minority to nonminority employees and in some cases a measure of the adjustments made to help close the gap. A quarter of the companies reported a specific new minimum or starting wage (usually $15 per hour but in some cases $11 per hour). Culture initiatives—Twenty-two percent of companies mentioned some of the ways they are embedding or measuring culture beyond compliance with codes of conduct or executive pay considerations. Some of the practices highlighted include employee surveys and benchmarking reports, employee town halls, unconscious bias trainings, leadership team events, and the inclusion of culture-related messaging and feedback via onboarding processes, performance reviews and exit surveys. Half of the companies that discussed culture initiatives said that they use employee surveys to measure Some of the other KPIs mentioned included diversity hires, employee engagement, turnover and issues escalation resolution. With limited exceptions, the companies did not provide quantitative results for their disclosed KPIs. Workforce health and safety—Twenty-two percent of companies discussed commitments, initiatives or benefit programs related to workforce health and safety. These disclosures included topics such as employee health and wellness resources and benefits, and, in some cases, safety metrics for the company and its suppliers. Less than half of the companies that discussed workforce health and safety disclosed any related Among those that did, the most common were recordable injury rates and the number of employees participating in certain health and wellness programs. However, only a handful of companies provided quantitative results for their disclosed KPIs. Workforce skills and capabilities—Twenty-two percent of companies mentioned initiatives related to employee re-skilling, training, and leadership development programs and related resources. The level of detail provided around these programs varied. Half of the companies that discussed workforce skills and capabilities provided at least one related quantified KPI This information generally included the aggregate amount of money or employee hours invested in training programs, or the number of employees participating in internal training or career planning programs. Workforce stability—A handful of companies provided observations regarding the stability of their workforce. Most of these companies noted employee engagement scores and certain turnover rates (e.g., turnover rate for high-performing personnel) as KPIs; few provided quantified results for their KPIs. Disclosures relating to board oversight of human capital and culture We found that most companies do not specify how the board and its committees allocate oversight of various dimensions of human capital or culture. Just over 40% of the Fortune 100 broadly stated that the board oversees human capital management or culture, but it was not always clear what specific topics (e.g., workforce diversity, learning and development, or recruitment and turnover) are encompassed by that oversight. At most companies, we found human capital and culture-related oversight responsibilities assigned to various committees based on their respective areas of focus (e.g., the audit committee often oversees compliance with employee codes of conduct while the compensation committee may oversee pay equity), but it was unclear whether these responsibilities reflect the complete picture of the board’s oversight in this space. Overall, we found that proxy disclosures would benefit from more specificity around what dimensions of human capital management and culture are overseen by the board and how the board is executing that oversight. Many boards seek directors with human capital‑related expertise Nearly a third of companies included human capital-related experience among the skills and areas of expertise sought at the board level. In describing this desired expertise, these companies used phrases and terms such as human capital management experience, talent or workforce management or development, or experience in building values-based ethics and compliance programs. More companies (44%) cited human capital-related experience in at least one director biography in describing the key reasons that person is qualified to serve on the board. The backgrounds of these directors vary. Some disclosures point to a candidate’s recognized leadership in diversity and inclusion, experience in shaping culture initiatives or background in human resources. Others cite human capital and culture experience related to executive leadership, scaling businesses, mergers and acquisitions, and service on other boards, among other factors. Emerging frameworks and KPIs for human capital and culture disclosures Companies seeking to enhance how they measure and report on human capital and culture may look to a variety of market-driven frameworks that support the redefinition and communication of corporate value through an expanded stakeholder lens. The following groups, for example, have created frameworks for measuring and reporting on long-term value, in each case identifying human capital as a leading driver. For example: The Embankment Project for Inclusive Capital (EPIC), which was formed by the Coalition for Inclusive Capitalism and Ernst & Young LLP, convened more than 30 global capital markets leaders to develop a standardized, material and comparable set of nonfinancial metrics for the measurement of company activities related to long-term value. Talent was identified as a key driver of long-term value, and EPIC proposed metrics and narrative disclosures to help guide related company reporting. [2] The SASB is an independent body that has published a set of detailed, industry-specific standards intended to enable companies to manage, measure and report on sustainability factors that drive value and affect financial SASB’s standards are organized into five groups, one of which is human capital. The Global Reporting Initiative (GRI) is an independent international organization that helps businesses and governments understand and communicate their impact on sustainability issues such as climate change, human rights, governance and social well-being. The GRI Standards cover human capital topics such as recruitment and retention, labor and management relations, health and safety, training and education, diversity and pay equity. [3] International Standards Organization (ISO) is an independent, nongovernmental international organization that develops voluntary, consensus-based, market-relevant international ISO 30414:2018 provides guidelines and metrics for human capital reporting, including diversity, organizational cultural, health and safety, recruitment and turnover, skills and capabilities, and more. [4] These frameworks suggest KPIs that companies may use to better communicate human capital value. The KPIs generally correspond to those articulated by commenters on the SEC’s concept release and the Human Capital Management Coalition 2017 rulemaking petition to the SEC, which are discussed in the Regulatory developments section that follows. Companies using these external frameworks to provide human capital and culture disclosures may help enable comparability and avoid the perception that their disclosures lack substance. Further, companies that integrate data-rich human capital disclosures (as well as substantive disclosures related to other long-term value drivers) into public reporting beyond CSR and sustainability reports may more consistently and comprehensively communicate how the company is creating long-term value. In today’s business environment, integrating information around long-term value drivers like human capital and culture across company communications is increasingly important. A diverse and growing group of market participants view responsible corporate citizenship and increased attention to stakeholder interests—especially employees—as consistent with, and perhaps even critical to, creating long-term shareholder value. The Business Roundtable’s August 2019 statement on corporate purpose is among the most recent examples of these shifting dynamics. Regulatory developments In addition to market-driven reporting developments, regulatory developments may also drive changes in how human capital and culture is managed, governed and disclosed. Human capital For several years, the SEC has been working to make its disclosure requirements more modern, streamlined and effective. One area of focus has been on required business and financial disclosures. The business disclosures include, among many other topics, a requirement that registrants disclose the number of people they employ. This was and still is the only specific business disclosure requirement directly related to human capital. The historical approach of disclosing only the costs of compensation and benefits often is not enough to fully understand the value and impact of human capital on the performance and future prospects of an organization. [5] —SEC Chairman Jay Clayton In 2016, the SEC issued a concept release to solicit comment on the information investor’s need to make informed investment and voting decisions and whether certain of its rules had become outdated or unnecessary. In response, the SEC noted [6] that it had received comments advocating for expanded human capital disclosures in the following areas: Worker recruitment, employment practices and hiring practices Employee benefits and grievance mechanisms “Employee engagement” or investment in employee training Workplace health and safety Strategies and goals related to human capital management and legal or regulatory proceedings related to employee management Whether employees are covered by collective bargaining agreements Employee compensation or incentive structures In July 2017, the SEC received a rulemaking petition [7] from the Human Capital Management Coalition, a cooperative effort currently involving 28 institutional investors representing more than $4 trillion in assets, to require registrants to disclose information about their human capital management policies, practices and performance, including in categories such as: Workforce demographics Workforce stability or turnover Workforce composition—such as temporary, contract or migrant Workforce skills and capabilities Workforce culture and empowerment Workforce productivity Human rights commitments and their implementation Workforce compensation and incentives Comment letters filed in support of the petition asserted that human capital management is important in assessing the potential value and performance of a company over the long- term and that companies with poor human capital practices might face operational, legal, and reputational risks, while companies with strong human capital management may develop a competitive advantage. In March 2018, the SEC Investor Advisory Committee (IAC) issued a recommendation [8] to the SEC that echoed this support for expanding human capital disclosures. [9] The recommendation notes that the financial markets view human capital as a source of value for companies and that institutional and retail investors want information about how companies approach human capital management, but the current accounting treatment of and disclosure requirements relating to human capital may not reflect this. The IAC encouraged the SEC to explore the possibility of including human capital disclosures in its disclosure modernization efforts. In August 2019, the SEC proposed rule amendments to revise current business disclosure requirements, including requiring more disclosure on human capital to the extent material. Noting the history described above and that “human capital may represent an important resource and driver of performance for certain companies” the SEC has proposed replacing the current requirement to disclose the number of employees with a principles-based requirement to provide: A description of the registrant’s 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’s business and workforce, measures or objectives that address the attraction, development and retention of personnel). The SEC is soliciting comment on this proposal, and has asked whether it should provide other nonexclusive examples of measures or objectives that might be material (and thus might be disclosed), including, but not limited to, the following: Number and type of employees, including full-time, part-time, seasonal and temporary Measures regarding the stability of the workforce, such as voluntary and involuntary turnover rates Average hours of training per employee per year Measures regarding worker productivity Information regarding human capital trends, such as competitive conditions and internal rates of hiring and promotion The progress that management has made with respect to any objectives it has set regarding its human capital resources The SEC will review comments received on this and other topics within the proposing release and consider issuing final rules at a future date. Culture The SEC has not specifically addressed corporate culture in its recent rulemaking efforts. Yet, the SEC and its staff have always emphasized the importance of corporate culture and the board’s related role in setting the all-important tone at the top. The SEC has always viewed boards of directors as gatekeepers who need to exemplify and oversee good corporate governance, a rigorous compliance environment and strong corporate culture. Increasing investor engagement on human capital and culture Investor attention to and engagement on human capital and culture have increased in recent years and will likely continue to grow, increasing the pressure on companies to strengthen their practices and disclosures in this space. Some of the world’s largest money managers have recently turned their focus to human capital. BlackRock, for example, began including human capital management (HCM) as an engagement priority in 2018. It states that a company’s approach in this area is a factor contributing to business continuity and success, particularly in today’s “talent constrained environment” and in light of evolving labor market trends. BlackRock acknowledges that human capital disclosures are evolving and says it believes “in the benefit of companies moving towards a more robust disclosure of HCM metrics.” BlackRock cites the SASB, discussed earlier, as a provider of industry-specific human capital metrics that companies may consider. [10] In 2019, State Street Global Advisors (SSGA) announced a focus on corporate culture “as one of the many, growing intangible value drivers that affect a company’s ability to execute its long-term strategy.” SSGA observes that “this is a challenging area for boards and management teams to report on.” It offers a framework as a starting point for how boards may approach this complex issue and sets the expectation that directors be able to discuss their role in influencing and monitoring culture. The framework suggests that senior management, under the board’s oversight, undertake three exercises (a comparative analysis, implementation and reporting) to align culture with long-term strategy. [11] Through our annual investor outreach program, the EY Center for Board Matters is hearing similar views from many investors. More than a third of the investors with whom we spoke in the fall of 2018, which included governance specialists from more than 60 institutional investors representing more than US$32 trillion in assets under management, said human capital management and corporate culture should be a top board focus, up from just 6% three years ago. Most of these investors told us that, at least for now, they are prioritizing dialogue over specific disclosure requests and generally seek to better understand how boards are engaged and exercising oversight in this space. As with companies, investors are on a learning curve in understanding how leading practice is evolving and what disclosures would be most valuable for assessing long-term value creation. The Human Capital Management Coalition, which submitted the 2017 SEC petition for rulemaking, also continues to engage companies and other market participants with the aim of understanding and improving how human capital management, encompassing desired company culture, contributes to the creation of long-term value. The group has worked for years to elevate human capital management as a critical component in company performance. [12] What comes next? Company disclosures—as well as board and management practices—regarding human capital and culture are poised to evolve further. From the growing market focus on how companies are creating value for multiple stakeholders, to investors seeking increased comparable data and transparency on these topics, to the SEC proposing to make human capital management a new disclosure topic, changes are on the horizon for how companies manage, oversee, and communicate around human capital and culture. What does this future hold? Disclosures and company practices will likely continue to be impacted by trends around technology and demographics. A preferred disclosure framework is likely to emerge, with commonality among the KPIs communicated (especially within industries). Boards will likely develop a stronger relationship with the Chief Human Resources Officer (CHRO) and continue to redefine the scope of their oversight of this space. And companies are likely to further integrate disclosures on human capital, culture and other long-term value drivers across a variety of reports beyond CSR or sustainability reports. The benefits of such developments could be substantial and include stakeholders, particularly shareholders, being better positioned to support the company’s long-term human value proposition as short-term challenges emerge. Questions for the board Does the board set the tone at the top regarding the strategic importance of human capital and culture by dedicating the appropriate level of time and attention to these topics, including at the full board and committee levels? Does the board have the right composition and resources to appropriately oversee culture and talent management in the wake of disruptive talent trends and transformation? In today’s information age, where the role of the CHRO is akin to the role of the CFO through the industrial age, is the board spending enough time meeting with the CHRO to oversee talent strategy and performance? Is the company communicating its culture and values across the workforce such that each individual employee fundamentally understands how her or his day-to-day responsibilities and performance drive strategy and aligns to the company’s purpose? Is the board regularly reviewing with the CHRO talent and culture metrics similar to its quarterly updates on financial metrics with the CFO? How is the company integrating human capital metrics and performance into earnings calls, analyst meetings and its external financial reporting to better communicate long-term value? How are culture and talent goals integrated into incentive compensation programs? How is the company monitoring and adjusting for any unintended consequences? Additional resource: Webinar - Incorporating HR & ESG In Corporate Strategy

As with many organizations today, reducing employee turnover became a business priority for the largest owner and operator of self-storage facilities in the world. To tackle this issue they applied advanced HR analytics with local market compensation data to identify the drivers of voluntary turnover and build the ideal candidate profile to achieve over $20 million in ROI. Join our January webinar to learn how HR analytics can help you reduce employee turnover and improve talent management outcomes. The following topics will be discussed: 1. A simpler and more dependable method to use Workforce Analytics 2. Performance and cost savings incentives to reduce voluntary turnover 3. Real-life examples of reductions in voluntary turnover Webinar Slide Deck Click here to download About Presenter Harish Reddy – Head of Product, HCMI Harish Reddy has over 8 years of experience working in Human Resources specializing in Workforce analytics, planning, and Business Intelligence. He has helped clients in the full cycle of workforce analytics and planning initiatives from creation to optimization that include reporting capabilities, statistical analysis, benchmarks, and measuring productivity. In his current role at HCMI, Harish works on client engagements to help companies successfully reach workforce analytics & planning goals and milestones with data driven decision making. He also develops leading products in workforce analytics and planning. Harish earned his MBA in Finance from Pepperdine University.