Governance
We help you prepare your SEC disclosure to accurately value your Human Capability.
What is Governance?
Over the last thirty years, drivers of market value have shifted from a primary interest in financial results. Today, earnings account for only 20 percent of market value and the rest is intangible. A key intangible factor is human capability- talent, leadership, organization and HR.
Because Human Capability is now more material for investors, the Securities Exchange Commission (SEC) in the United States mandated reporting “human capital” in 2021 10-K disclosures. These disclosures give investors information that affects this intangible 80% of market value. Our SEC analysis demonstrates that human capability accounts for 25% of cash flow and financial performance, 30 to 40% of customer value, and 35 to 45% of community reputation.
With little guidance, the response to the SEC reporting of human capital varied dramatically in length- ranging from under 200 words to over 2,000; in content- from safety to unions to broad axioms to specific quantitative data; and in location in the report- a separate section, risk, or management and discussion analysis.
Unlike the financial parts of 10K reporting, there is a lack of agreement to any standard logic for the human capital reporting. Today’s human capital reporting is analogous to a single financial measure, such as inventory turnover or free cash flow as a complete indicator of financial performance. Financial report requires a standard framework that allows comparisons across companies. Clearly, the same is true for Human Capability reporting.
“Talent and organization okay … mutually exclusive collectively exhaustive”
— CHRO, National Healthcare Company
The Data
Using our human capability framework and in partnership with Amazon AWS machine learning, we diagnosed how 7,000 firms scored on our “Human Capability” framework based on their SEC reports. For 5,700 of these firms, we were able to run predictive analytics about how human capability overall and in each of the four pathways (talent, + leadership, organization, and HR) impacted employee, financial, and social reputation outcomes. Our findings are double the industry average for impact of human capability on these results through surveys. This research validates the reliability of our human capability framework and the machine learning methodology.
We help you assess your current Human Capability disclosures and determine what you can do to improve in four pathways - talent, leadership, organization, and HR initiatives.
Immediately, we offer your company a customized report and insights based on your disclosures (without any additional work required from anyone in your company) that calculates your Human Capability score for each of the four pathways and allows you to compare to others in your industry, the top 10% across all industries and to all reporting companies in the SEC.
We recommend innovative and measurable initiatives that you can initiate and disclose to create more value. We also provide links to videos, toolkits and white papers to guide you to improve.
“Our report made us ask what are the gaps in information we share?”
— CHRO, Global Technology Company
We have drafted a report accessible to these companies that includes the importance of human capability, their scores, ranking in industry, and suggestions for how to improve future disclosures. This report can be used by investors, government agencies, boards, executives, investment relations/finance, future and current employees, and HR. A company can now utilize a standard framework, providing a more valid and more comparable report and use the information to improve their human capability as well as comply with SEC and any other reporting frameworks. All of this work will be confidential.
We offer your company: webinars and tools (over 100 articles, research papers, videos and playbooks) as well as subscriber forums to improve your Human Capability investments and disclosures and ensure success.
