Axne, Warner Introduce Updated Legislation to Reveal Investments in U.S. Workforce Development

May 25, 2021
Press Release
Legislation would require public companies to disclose training, turnover, workplace health and safety, other human capital metrics

Today, Rep. Cindy Axne (IA-03) and Sen. Mark Warner (D-VA) reintroduced their legislation to require public companies to disclose information about their management policies related to their workforces, including the investments they make on skills training, workforce safety, and employee retention.

The rise of service and intellectual property-based businesses has made current disclosure requirements insufficient to provide investors the clarity they need to evaluate modern businesses. The Workforce Investment Disclosure Act would require public companies to disclose basic human capital metrics, including workforce turnover rates, skills and development training, workforce health and safety, workforce engagement, and compensation statistics.

“Over the past century, we’ve seen businesses become less reliant on physical assets and more reliant on their workers, but the public disclosures we ask of our businesses don’t cover the investments they’re making in their employees,” said Rep. Axne. “We expect our public companies to disclose their holdings and their balance sheets – but in an economy that needs people in order to be productive, we must keep that same transparency to make the U.S. a leader in helping investors understand the long-term prospects of the companies they’re investing in. The COVID-19 pandemic has only emphasized how important this information is, especially when it comes to workplace health and safety or the ability to work from home.”

“In our information-based economy, workers are easily one of the most valuable assets that a company can have. However, there continues to be too much variability among public companies when it comes to disclosing human capital metrics,” said Sen. Warner. “This legislation will help provide a clearer picture of how public companies are managing, supporting, and investing in their workers – factors that significantly influence a company’s ability to innovate and compete.”

Background

In 1975, more than 80% of the S&P 500’s market value was in companies’ tangible assets like real estate holdings or purchased equipment. By 2015, tangible assets accounted for less than 20%.

Axne and Warner stressed the need for updated disclosure requirements in a letter to the U.S. Securities and Exchange Commission (SEC) last year.

In that letter, the members stressed the importance of standardizing the human capital management policies that companies disclose to the public, particularly policies regarding employee engagement and sick leave, investment in training, and administrative controls like cleaning practices, varying work schedules, and protective equipment for workers. 

Recently, Gary Gensler, the new Chair of the SEC, said that updating disclosure rules on workforce metrics would be an “early focus” and a “top priority” of his tenure.

Both Chairman Gensler and his predecessor, Chairman Jay Clayton, have affirmed the need for more information about companies’ human capital.

Support

“This bill takes disclosure on every company’s most valuable asset, People, out of the shadows and into the light. Every public and private company should be sharing these metrics in their public disclosures,” said Jeff Higgins, founder and CEO of Human Capital Management Institute.

"We know that human health, safety, and well-being are material to businesses’ bottom line, and human-centered policy interventions are critical to improving employee health, engagement and productivity,” said Rachel Hodgdon, President and CEO of the International WELL Building Institute. “We commend Representative Axne and Senator Warner for their continued leadership and introduction of the Workforce Investment Disclosure Act. This bill, which takes a significant step forward on driving transparency and incentivizing investment in the workforce, will help ensure businesses prioritize the overall welfare of their most valuable asset - their people. By simply compelling businesses to report on their workforce management policies, we can accelerate better corporate practices, recognize market leaders and spur powerful investments in the health, safety and equity of employees around the country."

“With more and more businesses seeking to offload responsibilities towards the workers who build their companies and their wealth, policymakers, the public, and investors need to know: Who are contracted workers? What are they earning? How safe are their jobs?  Simply put, good data is essential for good decision-making,” said Rebecca Smith, Director of the Work Structures Portfolio at the National Employment Law Project (NELP).

The bill is also supported by the California State Teachers Retirement System (CalSTRS).

Updating these disclosure requirements is already supported by notable investment and asset management firms.

In 2019, leadership of major investors BlackRock and State Street Global Advisory both emphasized the importance of human capital — and have indicated the need to create standardized reporting.

In addition, research from the Embankment Project on Inclusive Capitalism, a partnership between asset managers directing $30 trillion and large public corporations, found U.S. companies that disclose their total human capital costs outperform those that don’t.