“I’m looking for these data points and they’re not easy to find,” said Segalini, manager of a $1.2 billion healthcare equity fund at Fidelity Investments. “There is no obligation for companies to report the data.”
Workers are increasingly important in predicting corporate profitability, but investors receive little information about them. A growing number of large companies, such as General Motors Co., include workforce statistics in their annual sustainability reports, but the data is not standardized. Almost none quantify this information in quarterly or annual financial statements.
Labor shortages, which have hit hospitals particularly hard this winter, are also affecting sectors such as retail, recreation, education and technology, forcing employers to raise workers’ wages. The phenomenon some are calling the Great Resignation is contributing to runaway inflation and forcing Wall Street to address a problem that has been building for years.
“CEOs make these wonderful, flowery claims about the people who are their greatest assets,” said Jeff Higgins, founder of workforce consulting firm Human Capital Management Institute. “Why aren’t people on the balance sheet if they are the most important asset?”
Most public companies report the value of their assets, accounts receivable and inventory, but not human capital, i.e. the value of skills, loyalty, training and other characteristics of their employees. Investors want employers to consistently report specific data points using standardized metrics so they can compare one company to another.
Some fund managers are using big data, scouring websites such as Glassdoor and LinkedIn to estimate workforce trends at the companies they cover and in the economy as a whole. Others reiterate longstanding calls for regulations that would require companies to report employee data, including compensation, training, job satisfaction, demographics, and hiring and promotion rates.
The California Public Employees Retirement System, the nation’s largest pension plan, is a leader in the campaign for mandatory reporting. The pandemic has highlighted just how critical human capital risks are for companies and their investors, a Calpers spokeswoman said.
Of the 100 largest employers in the United States, 58% do not disclose salaries and benefits paid to their staff, 85% do not disclose turnover and 97% do not disclose promotion rates, a measure key to job satisfaction, according to nonprofit group JUST Capital. The few companies that publish human capital statistics often do so using inconsistent methodologies that prevent easy comparison.
The U.S. Securities and Exchange Commission is expected to unveil a rule in the coming months requiring the disclosure of standardized human capital data.
“I think they have a strong sense of urgency because of the pandemic and also because of the Great Resignation,” Mr. Higgins said.
American workers quit at a record pace in November and the high turnover could last for years, forcing employers to pay more to keep their staff. Earnings for Americans aged 16 to 24 rose in December at the fastest rate since 1997, according to the Federal Reserve Bank of Atlanta.
Maegan Olmstead and Michael Sullivan, a couple in their twenties living in Denver, quit their jobs during the pandemic.
Mr Sullivan left a client service role at fund manager Janus Henderson Investors in 2020 for a medical sales job with better pay and growth potential, he said. Ms Olmstead, a journalist, quit in December from a local newspaper over long hours and low pay, she said. She landed offers from three media companies in January, accepting one that will significantly boost her earnings, she said.
“Over the past few months I’ve seen a lot more job postings and read news about many people quitting,” Ms Olmstead said. “It was such a weight on my shoulders when I left that job.”
Data scientists at Neuberger Berman Group LLC combed through 380 million employee profiles to assess how well companies retain employees, said portfolio manager Hari Ramanan.
Data showed food delivery company DoorDash Inc. retained drivers better than competitors by giving them more flexibility to work for multiple employers, he said. He also identified unusually high employee engagement at Dutch chemical distributor IMCD NV, information he used to help forecast the company’s turnover and profitability.
“For us, it’s about determining which companies are best placed to manage employee turnover,” Ramanan said.
The SEC has long required companies to report their number of employees, and in 2020 asked them to add human capital metrics they deemed important to understanding their business. Some companies define the general financial relevance of human capital, but do not measure it in the same way as they count goods or equipment, the importance of which has diminished as the economy has shifted towards services. of manufacturing.
The 2020 amendment “did not significantly increase company disclosures, even in the face of the pandemic,” the Calpers spokeswoman said.
Commission staff have been working on a rule that would mandate additional human capital disclosures since SEC Chairman Gary Gensler took office last April. The new requirements would likely be mandatory for public companies and could relate to turnover, training and skills development, compensation, benefits, workforce demographics including diversity, and health and security, he said.
Companies such as FedEx Corp., GM and UnitedHealth Group Inc. opposed such prescriptive measures when the SEC last considered them in 2019, according to letters the companies sent to the regulator.
As Congress strives to pass progressive legislation, Gensler is using the authority of the SEC to establish disclosure requirements for public companies and fund managers to advance a number of Democratic policy priorities. . He is under pressure to pass politically sensitive rules soon, as Democrats risk losing their narrow majority in Congress after November’s midterm elections.
“You’re trying to force uniformity where there may not be any,” Republican SEC Commissioner Hester Peirce said in an interview, noting that company headcounts vary by country. industry and geographic location. boxes that we have established, cannot paint the picture of how he actually thinks about human capital,” she said.
For investors like Fidelity’s Mr. Segalini, the prospect of more detailed disclosure is a source of excitement.
“I would like to know the breakdown of employee compensation,” Mr. Segalini said. “To be fair, a good place to start would be the turnover of the entire workforce. I don’t want to be too greedy.”
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