HR Professionals Under SEC Spotlight

Human Resources ProfessionalHR Professionals are in the sights of The Securities and Exchange Commission (SEC).  The SEC may soon apply greater pressure on HR professionals when it comes to “human capital resources” reporting.  Updated guidance from the SEC may be imminent, according to HR Dive.

In 2020, the SEC amended a rule requiring companies to disclose human capital management resources if they are “material to an understanding of the registrant’s business”.  However, not much detail was provided beyond that.  A Notice of Proposed Rulemaking (NPRM) is expected in April, though, with a focus on board diversity.  An updated NPRM about human capital management disclosures could also be coming soon.

In light of the changing rules, investors are pressuring companies in general to align themselves with environmental, social and governance (ESG) strategies.  This likely means further evolution for the Chief Human Resources Officer (CHRO) role as well, HR Dive sources noted.

Things are changing in part because more companies, HR professionals, and HR leaders are paying attention to ESG.  Looking at its impact on business, along with prompting from shareholders.  Some companies have opted to tie in executive compensation to diversity and inclusion goals.  Others have created roles related to ESG specifically, according to a 2020 Willis Towers Watson survey cited by HR Dive.

Measuring success and creating accountability are two challenges HR departments may already be dealing with, or will have to figure out moving forward.  The problem is, not every department is ready to tackle those challenges.  In addition, there’s pressure on executives to get it right.

Employees are a big stakeholder in this new era of ESG and diversity, equity, and inclusion (DEI) initiatives.  Working for a company that aligns with their personal values is important to them.  And including ESG funds in the company retirement plan may encourage higher participation rates.

A focus on ESG is embedded at the board level, however, it has not fully trickled down to HR professionals.  According to Marie Holmstrom, southeast market leader for Willis Towers Watson, who was quoted in HR Dive, “‘We see there’s greater opportunity and greater linkage where a company not only reports on ESG but also their principles on ESG and how that translates into actual retention of employees,’” Holmstrom said.  Put another way, employees want to work for companies that have a clear north star and mission when it comes to these initiatives.

Going forward, HR professionals will likely be in the driver’s seat when it comes to steering future ESG and DEI initiatives.  That means not only collecting and reporting data, but also setting targets for success and accountability metrics.  HR is uniquely positioned to lead the way on these initiatives, and should take a proactive approach to doing so, even if the way forward isn’t entirely clear at this juncture.

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