Human Capital Management

Apr 18, 2024
Sustainability Reporting, Proxy Reporting, Annual Reporting

Introduction

Human Capital Management (HCM) disclosures are vital components of ESG reports, proxy statements, and annual reports. Investors and other stakeholders seek comprehensive disclosures on topics related to the development, attraction, safety, engagement, and retention of employees.

Stakeholders seek comprehensive disclosures on a range of HCM programs and topics, including: Diversity, Equity, and Inclusion (DE&I); management succession; pay structure; compensation incentives; equity policies; and employee engagement. Shareholders may use engagement and proposals to drive their HCM agendas, seeking insights into the company’s overall approach, board oversight, alignment with strategy, and the link between an engaged workforce and execution. Recent shareholder proposals call for diversity reports, pay gap reports, and disclosures on harassment, employment practices, and concealment clauses, shaping disclosure trends in these areas.

What to Discuss Where?

When it comes to HCM disclosures, a key question revolves around the appropriate level of detail of HCM disclosures to include in each of the annual report, ESG report, and proxy statement.

HCM is a perennial topic in annual reports, fueled in part by the SEC’s 2020 rules and recent renewed focus on Form 10-K disclosures. Outside of the required 10-K disclosure, the CEO letter and other narrative pages are filled with references to the importance of the company’s people.

Whether or not a company uses the term “human capital management” in their ESG Report, some topics are almost universally discussed, including: DE&I; recruitment, development, and retention; health and safety; and wellbeing and health benefits.

The proxy statement should at least acknowledge talent’s importance in the company’s long-term strategy, associated risks, and the board’s role in overseeing talent-related policies. It is advisable to illustrate board engagement by mentioning the frequency of reviews and provide insights into the board’s role in shaping culture and engaging directly with employees. Consideration should also be given to disclosing key goals, metrics, and initiatives mentioned in the Form 10-K, which can be included within governance disclosures or HCM highlights.

This Thought Piece examines what shareholders are expecting in Annual Reports, ESG Reports, and Proxy Statements by highlighting examples from BlackRock’s HCM disclosure in their Annual Report, ESG Report, and Proxy Statement.

HCM BlackRock’s Reports

HCM in the Annual Report

The narrative section of BlackRock’s Annual Report has one dedicated spread to the HCM topics, highlighting their commitment to fostering a vibrant company culture and nurturing its workforce.

BLACKROCK

HCM in the ESG Report

In an ESG report, HCM falls under the social section, and includes a comprehensive overview of the employee related topics referenced above. BlackRock provides thorough coverage in a clear and straightforward fashion, spanning across 10 pages.

BLACKROCK

HCM in the Proxy Statement

Across three pages, BlackRock’s Proxy Statement summarizes the company’s HCM strategy and key initiatives, and discusses the Board’s role in HCM oversight. Additionally, BlackRock discusses HCM oversight as it applies to the Board self-evaluation process, the responsibilities of the Management Development & Compensation Committee, and the management succession planning process.

BLACKROCK