Reporting on human capital is “not of sufficient quality to enable investors to identify risks and opportunities” related to the workforce, according to the Pensions and Lifetime Savings Association (PLSA – formerly the National Association of Pensions Funds).
In response to the challenge, the PLSA has published a toolkit, Understanding the worth of the workforce, to provide pensions schemes and investors with guidance on the information they should ask for from companies.
The toolkit recommends investors ask companies to report on the following metrics as standard:
- Gender diversity
- Employment type (full time, part time, agency)
- Staff turnover
- Accidents, injuries and workplace illnesses
- Investment in training and development
- Pay ratios (across highest, median and lowest quartiles)
- Employee engagement
The PLSA’s latest release is a follow up to its 2015 report Where is the workforce in corporate reporting, which found that only 47% of FTSE 100 companies reported on levels of turnover, 24% on training and development investment and 11% on workforce composition.
“We are all familiar with the phrases in annual reports affirming how important employees are to corporate success. But as our report last year highlighted, too often there is too little information in those same reports about how these employees are managed, developed and valued,” said PLSA policy lead: stewardship and corporate governance Luke Hillyard.
Hillyard added that the PLSA recommended a narrative reporting style which “balances data with rationale or context”.
The toolkit suggests that while the annual report remains the most common vehicle for communicating information on the organisation and workforce, investors should also look for verification of the annual report’s claims online, via employee testimonials (for example, Glassdoor). It also advises investors to ask more questions about the workforce in face-to-face meetings with company representatives.
Speaking to HR magazine about investor interest in human capital issues for a 2015 feature, The Investment Association director of corporate governance and engagement Andrew Ninian said investors should be interested in the workforce. “The starting point is good reporting,” he said. “Have that investors can take a view on if HCM is adding value and leading to a better performing company.”
