Meridian’s 2021 Study of Human Capital Management Disclosures (“2021 Study”) provides current information and data on human capital management (“HCM”) disclosures included in recent Form 10-K filings from 220 large U.S. public companies (“Study Group”).
New Requirement to Include HCM Disclosure in Form 10-K Filings
Generally, a U.S. public company is required to include a description of material business developments and material business operations in its annual report (Form 10-K) filed with the Securities and Exchange Commission (“SEC”). To guide public companies in identifying relevant disclosures, the SEC rules include a non-exclusive list of potential topics to include in their description of business developments and business operations, to the extent they are material to an understanding of the registrant’s business as a whole. Prior to a recent amendment to the SEC disclosure rules, this non-exclusive list of topics did not include human capital management matters.
That changed on August 26, 2020 when the SEC expanded this list of non-exclusive topics to include a description of a company’s “human capital” resources, including any human capital measures or objectives that a company focuses on in managing its business. While the text of the actual rule did not change, the expanded list of topics will likely impact disclosures for many companies. These topics depend on the nature of the business and workforce, but the SEC’s expanded list included human capital measures or objectives that address the development, attraction and retention of personnel.
The rule change is not prescriptive, but instead reflects a principles-based approach that leaves the definitions of “human capital,” “material” and “focus” largely up to each company’s judgment. As a result, public companies’ disclosures covered a wide variety of HCM topics, including policies and practices related to: company and workforce demographics; diversity, equity and inclusion (“DEI”); COVID-19; recruiting/retention/turnover; health and safety; pay equity; talent development and training; total rewards; employee satisfaction; corporate culture or core values; and other related matters.
Form 10-Ks filed after November 8, 2020 must comply with the change in the disclosure rule.
Study Scope and Development of Study Group Statistics
Our 2021 Study provides high-level insights into the prevalence and types of HCM-related disclosures made by Study Group companies. These findings are derived primarily from recent Form 10-K filings. However, in some instances, we also reviewed proxy statements or other related documents referenced within the Form 10-K. We developed meaningful categories of HCM disclosures and assigned each HCM disclosure to an appropriate category.
Both demographic and DEI information were primarily derived from the Human Capital Management section within the Form 10-K filing. However, for completeness, this Study captures demographic and DEI
information, regardless of where such items are disclosed in the Form 10-K filing.
Study Group Characteristics
Each of the 220 companies in the Study Group was a component company of the Standard & Poor’s 500® Index1 (“S&P 500®”) on December 31, 2020 (see Appendix 3 for list of Study Group companies). The
Study Group included companies across each major industrial sector of the S&P 500®, with median revenues and market capitalization nearly identical to the median revenues and market capitalization of the full S&P 500® (see table below).
Our findings include:
■ 100% of Study Group companies disclosed HCM topics in their most recent Form 10-K filings
■ The five most prevalent HCM topics disclosed by Study Group companies were:
― Employee Demographics (100%)
― Talent Development and Training (86%)
― Employee DEI Policies and Practices (77%)
― Health and Safety (75%)
― COVID-19 Related Policies (70%) (due to the easing of the pandemic’s economic impact during 2021, we would expect a significant decline in the prevalence of COVID-19 disclosures in 2022 filings however, this may be subject to change due to recent surge in the pandemic)
■ The scope and detail of HCM disclosures varied widely among Study Group companies, from a paragraph to multiple pages (see Appendix 2 for specific examples of HCM disclosures). As companies have more time to assess their HCM practices and policies, as well as study HCM disclosures in their peers’ 10-K filings, we expect a wider scope and more detail in future reporting cycles.
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