The SEC just mandated human capital disclosure: How to get ready with the new SEC rules in these 4 steps.

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What are the new SEC rules? Are you already complying with the new rules?

The world of learning and development and HR just changed dramatically for the better, and there will be no going back. Change is coming to publicly traded companies
first, but it will not stop there. Within a few years, the change will permeate all organizations, even privately held companies and non-profits. The long-awaited age of transparency for both investors and employees is finally here.

What is this momentous change?

In August 2020, the U.S. Securities and Exchange Commission mandated human capital disclosure by all companies selling securities in the United States. The rule is effective Nov. 9 and there is no grace period, so publicly traded companies will need to disclose material on human capital information starting with their Nov. 30, Dec. 31 or Jan. 31 quarterly or annual public financial release.

A short history

In 2015, the SEC undertook a once-every-other-generation review of the rules, with the understanding that the world had changed significantly since 1977. Three things had their attention.

  1. The pace of change had increased to the point where any new prescriptive list of items to disclose would be outdated within a few years.
  2. The nature of companies had changed dramatically. Most companies were no longer engaged in manufacturing, and a list of prescribed items that worked for manufacturing would not work for services.
  3. This is essential, the primary driver of value was now human capital — not physical capital.

Human Capital is the main drive for investors today.

Human capital today is the primary driver of stock price and the value of a company. Yet, financial statements do not include any entries for human capital, and the balance sheet continues to be about physical capital. At this moment, companies must disclose only one item about their primary driver of value, and that is the number of employees.

These new rules allow investors to understand if the workforce can handle the business challenges a company faces. By looking at the entire HCM (human capital management) operation a company has in place, it’s easier to determine if the company can handle challenges.

4 general steps to get you started, laid out in an infographic

To make it easier for you to comply, we’ve compiled 4 general steps you can take now. Because we can’t plan for every type of public company, you’ll have to fill in some blanks. But we’re confident you can manage that just fine. We’ve laid it out in an infographic. This allows you to download it, access it on to the go, or use it in a meeting when you define a strategy to comply with these rules.

If you’re heading into a digitization effort and don’t know where to start. Request a demo today to see how you can eliminate unnecessary manual labour and drive more effective outcomes with KeenCorp’s most accurate employee analysis software.

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