Bloomberg Law
Aug. 26, 2020, 5:24 PM

Divided SEC Requires More Workforce Disclosures From Companies

Andrew Ramonas
Andrew Ramonas
Securities Regulation Reporter

Companies will have to tell investors about how they manage their workforces under new SEC rules that Democratic commissioners say don’t go far enough.

A divided Securities and Exchange Commission adopted the disclosure changes to Regulation S-K on a 3-2 vote Wednesday, with Democrats saying the plan doesn’t require specific reporting in areas such as workplace turnover and diversity.

Regulation S-K focuses on companies’ non-financial reporting requirements. Companies now will need to disclose human capital objectives and measures they concentrate on when managing their businesses, among other updates to Regulation S-K. The commission previously only directed companies to report how many workers they have.

“I do not remember engaging with a high-quality, lasting company that did not focus on attracting, developing, and enhancing its people,” SEC Chairman Jay Clayton said before voting in favor of the changes at an open meeting. “To the extent these efforts have a material impact on their performance, I believe investors benefit” from knowing what drives that performance.

Democratic Commissioners Allison Lee and Caroline Crenshaw opposed the changes. The Regulation S-K rulemaking should have required more specific reporting about company workforces, as well as disclosures about climate change risk, they said.

The agency could have used the new rules to mandate disclosures related to part-time and full-time workers, workforce expenses, turnover, and diversity, Lee said.

“I am concerned that today—in the middle of a crisis affecting all aspects of our market—the majority of the commission is failing to take the opportunity to provide investors with critical and useful information about key corporate metrics,” Crenshaw said in her first open meeting since she became a commissioner earlier this month.

Crenshaw urged the agency to create an internal task force to study how investors use disclosures about human capital, climate change risk, and other Environmental, Social, and Governance metrics. The commission should establish an ESG advisory committee with investors, company officials, and others to help guide the agency, she said.

The rules are set to take effect 30 days after they appear in the Federal Register. The publication likely will happen in the coming days or weeks.

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To contact the editor responsible for this story: Michael Ferullo at