Abstract
The major research question of this study is how boards of directors can monitor human resource reporting, especially with emerging reporting requirements from the U.S. Securities and Exchange Commission (SEC) for all domestic and foreign public companies listed on U.S. stock exchanges. Boards can develop advising and monitoring practices to help their companies meet the SEC’s human capital reporting requirements, as shown by the following topics discussed and analyzed in this paper: criticisms of the modernization of Regulation S-K by using principle-based versus rules-based disclosures; a way forward on the modernization of Regulation S-K; sustainability accounting standards; human resource accounting; board responsibility for white-collar crime risk; and collegiality conundrums. We find that a possible way forward in modernizing human capital reporting would be to combine a rules-based approach with a principles-based approach. We recommend boards to closely follow the United Nation’s Sustainable Development Goals and create opportunities to steer their companies towards a sustainable future. We also research the newly developed accounting standards to address human resource risks and promote sustainable human capital reporting. In addition, we identify the strategies for boards to monitor the risk of white-collar crime and highlight the balance between collegiality and effectiveness in the boardroom. Future research could use case studies and interviews of company boards to investigate how they have developed strategies and procedures to facilitate human resource management and reporting
Highlights
On August 8, 2019, the Securities and Exchange Commission (SEC) announced a reporting rule amendment to modernize the description of the business, legal proceedings, and risk factor disclosures that registrants are required to make pursuant to Regulation S-K
An empirical study of 133 companies listed in the S&P Composite 1500 Index investigated the impact of greenhouse gas (GHG) emissions, Dow Jones Sustainability Index (DJSI), and anti-bribery policy on the extent of corporate social responsibility (CSR) disclosure, measured by the environmental, social, and governance (ESG) disclosure score calculated by Bloomberg
The return on investment (ROI) on human capital was historically focused on managing cost and many companies are still thinking and managing that way
Summary
On August 8, 2019, the Securities and Exchange Commission (SEC) announced a reporting rule amendment to modernize the description of the business, legal proceedings, and risk factor disclosures that registrants are required to make pursuant to Regulation S-K. Refocus the regulatory compliance requirement by including material government regulations, not just environmental provisions, as a topic (SEC, 2019) The intent of this SEC amendment is to elicit material disclosures regarding human capital that allow investors to better understand this resource and to see how it is managed through the eyes of company management. Each of our stakeholders is essential and we commit to deliver value to all of them, for the future success of our companies, our communities, and our country” (Business Roundtable, 2019) Such a new focus on the purpose of a corporation and the responsibility of a public company will increase the responsibilities of boards of directors and strengthen corporate governance. Boards of directors can improve corporate governance by focusing their companies on all stakeholders, especially employees and their human capital, not just their shareholders, as envisioned and consistent with the Business Roundtable’s new focus on the purpose of the corporation.
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