Press Releases

WASHINGTON – U.S. Sen. Mark R. Warner (D-VA) has urged the U.S. Securities and Exchange Commission (SEC) to require companies to disclose more information regarding their investment in workers, such as turnover rates, amounts spent on employee training opportunities, and whether workers are considered full-time employees or contractors. Sen. Warner’s letter comes as the SEC considers public comments regarding its proposed modernization of Regulation S-K, the set of SEC rules that establish disclosure requirements for public companies.  

“As our nation continues to evolve and our economy becomes more knowledge-based, workers are easily becoming the most valuable asset a company can have. Human capital can affect a company’s potential, and when properly cultivated, can boost its ability to adapt, innovate, and compete,” said Sen. Warner, regarding the letter he sent to the SEC. “I appreciate the SEC’s commitment to fostering a culture of increased investment in our workers, but urge it to take this effort a step further by requiring companies to disclose exactly how they’re investing in their labor force.”

The SEC’s current proposed rule would require that companies broadly disclose human capital resources, measures, and objectives, but not necessarily specific metrics, which can be valuable for potential investors across a variety of industries.

In the letter to SEC Chairman Jay Clayton, Sen. Warner applauded the SEC’s efforts and urged the SEC to take additional steps, including requiring disclosure of specific metrics related to worker training, turnover rates, and full versus part-time workers. This kind of information can be easily compared across industries and companies, and can help shareholders better understand risks to company performance, and potential long-term systemic risks to the economy.

Sen. Warner has been an outspoken advocate of investing in our workers, and ensuring they are adequately equipped to participate in the 21st century labor force. Earlier this year, the SEC announced this proposed rule following advocacy by Sen. Warner, who last year urged the Commission to heed the calls of investors and utilize its rulemaking authority to require companies across the board to provide further details relating to human capital management.

The letter text can be found below and a PDF copy is available here.


The Honorable Jay Clayton


Securities & Exchange Commission

100 F Street, N.E.

Washington, DC 20549

United States File Number S7-11-19

Dear Chairman Clayton,

I applaud the Securities and Exchange Commission’s (Commission’s) recent actions on the Modernization of Regulation S-K, particularly with regard to Item 101, and welcome the opportunity to comment on an issue that has long been a focus of mine. Human capital is among a company’s most valuable assets. It is critical to a firm’s ability to innovate, adapt, and compete as companies in the United States transition to a 21st-century knowledge-based economy. As the proposed rule notes, “intangible assets [including human capital] represent an essential resource for many companies.”

Beyond the value that human capital holds for a company itself, shareholders increasingly expect public companies to disclose material issues affecting a businesses’ financial performance – such as investments in human capital and worker training. These disclosures are relevant and important to shareholders, not only in order to better understand risks to company performance, but also to understand potential long-term systemic risks to the economy. You have also raised the issue of the importance of human capital disclosures to shareholders, most recently in May 2019 at the Investment Company Institute, stating, “If I am an investor looking at businesses today, I want to know what you are doing with your human talent, how you are growing your human talent, how you are accessing new talent, how you are retaining existing talent . . .”

The route that the Commission has taken with the proposed rule is encouraging, however, I believe the more appropriate route should be a principles-based approach that incorporates some prescriptive elements. As the Commission notes, the current human capital element in Item 101(c) “dates back to a time when companies relied significantly on plant, property, and equipment to drive value.” With regard to the Commission’s proposed amendments, I could not agree more that Item 101(c) should be modernized to include human capital resources, measures, and objectives as a disclosure topic. Further, I recognize the value that a principles-based approach holds for human capital management disclosures. Setting objectives and letting management judge what information best satisfies the disclosure requirements for the registrant is beneficial, but cannot be the entire picture. Human capital management, and the metrics used to measure it, differs from one industry to the next and even among companies within the same industry. A purely prescriptive approach may miss important subjective information, but a purely principles-based approach would fall short by losing the benefits of increased consistency and comparability for investors.

I understand that you have expressed concerns about the value of mandating certain metrics as disclosure items across all industries, but I encourage the Commission to consider the value of quantitative information that is of a high value to investors across a variety of industries. Specific disclosures make it easier to compare registrants, which is important to potential investors. You have commented on the importance of comparability yourself, for instance in February 2019 during a phone call with Investor Advisory Committee Members: “for human capital, I believe it is important that the metrics allow for period to period comparability for the company.” There are certain disclosure items, such as whether workers are full-time or contractors, turnover rates, and spending on employee training opportunities, that can provide universal value across all industries. I recognize the risk that prescriptive metrics can pose – that companies may “manage to the metric,” as the SEC Investment Advisory Committee put it. However, I encourage the Commission to engage with investors, registrants, and experts further to learn more about metrics that may serve useful purposes while minimizing unintended consequences.

With regard to the utility of non-exclusive examples, I believe that the Commission should provide these to registrants. Principles-based disclosure can lack direction. Examples will be especially useful for registrants when disclosing on new human capital management metrics.

I believe the addition of more human capital management disclosure requirements to Regulation S-K furthers the Commission’s mission to “protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” Thank you for your attention to this critical matter.