Public companies should start thinking about the new human capital disclosure requirements. Here are some thoughts on them and related issues.

1. Human Capital
Disclosure and
Related Topics
September 2020

2. | 2September 2020
Introduction
Human Capital Disclosure and Related Topics
 The SEC recently adopted comprehensive changes to the business, legal
proceedings and risk factor disclosure that companies are required to
include in periodic reports and registration statements
 One key change relates to so-called “human capital resources”
 While the old rule only required companies to disclose the number of their
employees, the new rule requires companies to also include a description of
their human capital resources
 SEC Chairman Clayton noted that he is particularly supportive of the
increased focus on human capital, which he views as an important
driver of long-term value for various industries and companies
 This change follows recent COVID-19-related SEC guidance that
emphasized human capital as an important disclosure topic
 The following slides examine the new requirement, include examples of
relevant disclosure and touch on other related topics

3. | 3September 2020
Human Capital Disclosure
Human Capital Disclosure and Related Topics
 The new rules require a description of a company’s human capital
resources to the extent material to an understanding of its business,
including:
 The number of persons employed by the company; and
 Any human capital measures or objectives that the company focuses
on in managing its business
 The SEC stated that examples of potentially relevant subjects are
measures or objectives that address the development, attraction and
retention of personnel
 The SEC noted that these examples are not mandates and each
company’s disclosure should be tailored to its unique business,
workforce and circumstances
 The SEC declined to define the term “human capital”
 The SEC noted that this term may evolve over time and may be
defined by different companies in ways that are industry-specific

4. | 4September 2020
Human Capital Disclosure (continued)
Human Capital Disclosure and Related Topics

Worker recruitment

Workplace health and safety

Employment / hiring practices

Strategies and goals related to human capital
management

Employee benefits and grievance mechanisms

Legal / regulatory proceedings related to
employee management

Employee engagement

Whether employees are covered by collective
bargaining agreements

Investment in employee training

Employee compensation / incentive structures
 Consistent with the SEC’s shift to a more principles-based disclosure
regime, it did not include more specific requirements
 The SEC noted that the exact measures and objectives included in
human capital management disclosure may (1) vary significantly based
on industry, geography, strategic posture and macroeconomic
conditions and (2) evolve over time
 In the SEC’s proposing release, it also mentioned the following examples of
potential human capital topics:

5. | 5September 2020
Examples of Human Capital Disclosure
Human Capital Disclosure and Related Topics
Company Disclosure
FedEx
General
Mills
At FedEx, we view our greatest asset as our people, and we are committed to providing a workplace where
our team members feel respected, satisfied and appreciated, which includes promoting a diverse and
inclusive workplace. We see the diversity of backgrounds, perspectives and experiences that our team
members bring to the company as essential to fostering exceptional business results. We are committed to
strengthening our team members’ careers and their general health and well-being, offering programs that
help team members advance in their careers and providing training, mentoring and networking opportunities,
as well as health and wellness programs, including competitive employee health benefits.
People are at the heart of our mission, and the future success of the company will in large part be determined
by the talent, skills and culture of our workforce. I can assure you that the board is actively involved in
overseeing the company’s efforts to foster a diverse and inclusive workforce. The board regularly reviews our
human capital management strategies to attract, develop and safeguard the well-being of our talented and
dedicated team. The board is also actively engaged with management to create a corporate culture that
embodies the attributes and behaviors necessary to advance our strategies.
To enhance the board’s understanding of the company’s work environment and culture, the board regularly
conducts meetings and schedules site visits at the company’s food production facilities. More broadly, the
board and its applicable committees provide oversight on culture and human capital management topics,
including diversity and inclusion, pay equity, recruiting and development, ethics and compliance and
programs to prevent harassment and promote workplace health and safety. The board also reviews critical
feedback provided through regular employee culture surveys and receives updates on management’s plans
for addressing concerns or potential areas of improvement.

6. | 6September 2020
Human Capital Shareholder Proposals
Human Capital Disclosure and Related Topics
0
20
40
60
80
1H 2019 1H 2020
Human Capital
Shareholder Proposals
Company Proposal
Wells Fargo Gender/racial pay gaps
Google Mandatory employee
arbitration
Marriott Workplace diversity
Walmart Sexual harassment
Examples of Recent
Human Capital Proposals
Common Arguments
To Exclude Proposals
• Company has already
“substantially” implemented
the proposal
• Micromanagement / proposal
relates to “ordinary business
operations”
• Shareholder foot fault (e.g.,
failure to prove ownership)
 Shareholder proposals relating to human capital issues have been steadily
rising in recent years
 Given the recent focus on social and economic justice issues, these
types of proposals are expected to continue to be prevalent
 In addition, the recent changes to the disclosure requirements are likely
to further sharpen the focus on these topics

7. | 7September 2020
Summary of Potential Action Items
Human Capital Disclosure and Related Topics
Topic Potential Action Items
 Disclosure • Company should determine what human capital information is
material to investors and craft related disclosure for 10-K, as well
as proxy statement
• Company may supplement any existing disclosure added in
response to SEC COVID-19 guidance or otherwise
• Company should consider disclosure of peers and competitors
 Board
involvement
• Board should be made aware of the new disclosure
• Board and management should also consider the directors’ role
in overseeing the company’s approach to human capital (e.g.,
identifying relevant metrics, implementing reporting systems, etc.)
 Investor
engagement
• Company should be prepared to engage with its investors on
human capital issues and address any shareholder proposals
• Company should understand its investors’ views on these matters
• “Big Three” asset managers have emphasized importance
of focus on human capital