Push for companies to reveal more about employees

Workers are increasingly important to forecasting corporate profitability, but investors receive little information about them.

Outside a career fair in Kentucky. Of the 100 largest employers in the US, 58 per cent don’t disclose the salaries and benefits paid to their workforce, 85 per cent don’t disclose staff turnover and 97 per cent don’t disclose promotion rates. Picture: Bloomberg

Two years into the pandemic, healthcare fund manager Justin Segalini is trying to keep track of staffing levels at the hospitals, nursing companies and pharmacies he invests in. He peppers management teams with questions about quit rates, wages and salaries – key human-capital indicators that few companies report.

“I’m looking for these data points and they’re not easy to find,” said Mr Segalini, manager of a $US1.2bn ($1.67bn) healthcare-services stock fund at Fidelity Investments. “There’s no requirement for the companies to report the data.”

Workers are increasingly important to forecasting corporate profitability, but investors receive little information about them. A growing number of large companies such as General Motors include some workforce statistics in annual sustainability reports, but the data isn’t standardised. Almost none quantify such information in quarterly or annual financial statements.

Labour shortages, which hit hospitals especially hard this winter, also are affecting industries including retail, leisure, education and technology, forcing employers to increase worker pay. The phenomenon some call the Great Resignation is contributing to runaway inflation and forcing Wall Street to reckon with a problem that has been building for years.

“CEOs make these wonderful flowery statements about people being their greatest assets,” said Jeff Higgins, founder of consulting firm the Human Capital Management Institute. “Why aren’t people on the balance sheet if they are the most important asset?”

Most public companies report the value of their property, accounts receivable and inventory but not human capital – the worth of their workers’ skills, loyalty, training and other characteristics. Investors want employers to consistently report specific data points using standardised measurements so they can compare one company to another.

Some fund managers are using big data, scouring websites such as Glassdoor and LinkedIn to estimate workforce trends in the companies they cover and the economy as a whole. Others are reiterating longstanding calls for regulation that would force companies to report employee data, including pay, training, job satisfaction, demographics and hiring and promotion rates.

The California Public Employees’ Retirement System, the country’s largest pension plan, is a leader of the campaign for mandatory reporting. The pandemic had highlighted how critical human-capital risks were to companies and their investors, a Calpers spokeswoman said.

Of the 100 largest employers in the US, 58 per cent don’t disclose the salaries and benefits paid to their workforce, 85 per cent don’t disclose turnover and 97 per cent don’t disclose promotion rates, a key measure of job satisfaction, according to non-profit group JUST Capital. The few companies that report human-capital statistics often do so using inconsistent methodologies that prevent easy comparison.

The Securities and Exchange Commission is expected to unveil a rule in coming months requiring disclosure of standardised human-capital data. “I think they have a strong sense of urgency because of the pandemic and also because of the Great Resignation,” said Mr Higgins.

American workers quit at a record pace in November and the high turnover could last for years, forcing employers to pay more to keep their staff. Wages for Americans aged 16 to 24 rose in December at the fastest pace in records tracing back to 1997, according to the Atlanta Fed.

Data scientists at Neuberger Berman have combed through 380 million employee profiles to assess how well companies retain employees, portfolio manager Hari Ramanan said.

The data showed that food-delivery company DoorDash retained drivers better than competitors by giving them more flexibility to work for multiple employers. It also pinpointed unusually high employee engagement at Dutch chemicals distributor IMCD, information he used to help forecast turnover and profitability at the company.

“For us it’s about figuring out which companies are better positioned to handle employee turnover,” Mr Ramanan said.

The SEC has long required companies to report employee numbers and in 2020 instructed them to add human-capital measures they deemed material.

The Wall Street Journal