Why Companies Should Publicly Disclose Their Workforce Policies

Human capital issues are becoming increasingly important to modern day corporate success. Over the last several years, some of the biggest U.S. corporations have enacted better workplace policies, from making efforts to narrow the pay gap (Salesforce and Microsoft) to providing better training (JPMorgan Chase and Walmart).

Even investors are starting to pay closer attention. Recently, the Securities and Exchange Commission (SEC) Investor Advisory Committee responded to petitions by institutional investors to incorporate human capital management into its corporate reporting and disclosure regime by recommending the SEC examine the case for better disclosure. This will only up the ante for human capital performance measurement and encourage companies to signal their leadership on transparency around the issues most important to the American people—their treatment of their workforce.

At JUST Capital, we spent the last year analyzing 890 of the largest publicly traded U.S. companies on their approaches toward key human capital management issues identified as priorities by a representative sampling we conducted of over 80,000 Americans. This assessment of the current state of worker-related policies across corporate America revealed a sobering picture: It’s still the wild west of workforce policy disclosure with little direction on how to best measure issues like pay equity, paid time off, paid parental leave, flexible work, diversity and inclusion policies and targets, provision of day care services, worker training policies, and tuition reimbursement. The lack of standards on this also means investors are unsure of how to evaluate the information once it is disclosed. These results support three major takeaways:

The first is that public information on these workforce policies is incredibly difficult to find. We found that only 2%—or specifically 18 of the 890 companies we analyzed—disclosed their workforce policies on all the nine issues we studied. This suggests that either the majority of companies have not committed to creating these workplace policies, or that they are reluctant to reveal results. Whatever the reason, this first step seems to be the hardest right now. Public disclosure, however, can pay dividends to those that commit to it: The companies that disclosed their workforce policies generated up to 3% higher return-on-equity than their peers.

The second takeaway is the lack of consistency from companies who do disclose such policies. Absent any mandated guidelines or reporting requirements, there are wide differences between the quantity and quality of information provided—meaning that the information, while not useless, is significantly less impactful. There’s no clear way to identify leadership and best practices for all companies to emulate and not enough data—therefore little research—to assess if leadership on workforce policies is delivering on investment.

Take pay equity: The actual disclosure varies widely from employer to employer. Different companies use different terminology, ranging from gender wage gap to pay disparities to gender equity. Most make generic statements representing adjusted pay gap figures like, “Women are paid on average 95% of what men are paid,” or that the company has achieved “100% pay equity for women and men.” With agreed-upon standards, and then agreed-upon ways to measure them, the market would be able to create apples-to-apples comparisons and understand where the leaders and the laggards actually are on these topics.

Finally, it is unclear what progress is actually being made beyond the declaration of policies. Even though companies had made public pledges to improve their workforce policies, it was nearly impossible to tell whether those pledges translated into tangible change for workers (such as whether companies are actually hitting their diversity and inclusion targets or whether workers are experiencing a greater work-life balance through flexible work hours, paid time off, and parental leave). With reporting standards, those assessments could be made.

The market, and indeed society, cannot begin to benchmark and incentivize enhanced performance on these critical workforce issues until more companies disclose their actual policies as the first step. Companies can establish themselves as leaders by providing greater transparency and investing in their workforce as their most valuable asset. Their workers, and their shareholders, will benefit.

Martin Whittaker is the CEO of JUST Capital.

Source: http://fortune.com/2019/04/29/human-capital-workplace-policy-investment/?xid=gn_editorspicks

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