Wednesday, February 3, 2021

Now that the 10-Ks for 2020 are rolling in, you may be noticing a new disclosure item in those reports: “human capital” factors.

What are those, exactly? They are new disclosures required by the Securities and Exchange Commission as of Nov. 9, 2020. All filers are supposed to include details about their workforce such as:

  • Total number of employees, and employees per business segment when those segments are material to the business;
  • Any “human capital metrics or objectives,” such as employee turnover, tenure on the job, or percentage of employees in unions; and
  • Any information the business deems material about diversity and inclusion, either among employees as a whole or management specifically.

Human capital disclosures will typically be reported in the Business Description part of the 10-K. For now those disclosures will also vary quite a bit, because the SEC didn’t include a definition of “human capital” or any specific metrics that must be reported. Each firm can decide for itself what counts as a material item related to human capital that should be disclosed. (Compared to financial disclosures, for example, where firms have extensive and precise guidance on what goes into the filing.)

Anyway — yes, Calcbench can help you find these human capital disclosures! Just use our Interactive Disclosure tool, selecting “Business Description” from the pull-down menu on the left side. Skim down through the text, and you should see the material under a heading like “Human Capital.”

Firms only started making human capital disclosures in 10-Ks filed after Nov. 9, 2020; which means we don’t have many examples to study yet. But now that year-end filers are starting to submit their reports, Calcbench traipsed through a few examples. Here’s what we found.

MDC Holdings

Home-builder MDC Holdings ($MDC) is interesting because it provided a breakdown of employees by business unit in table format, in the 10-K it filed on Feb. 2. See Figure 1, below.

The rest of the disclosures are all narrative, which is fine although nothing terribly interesting. MDC only jumped out at us because on that same day, its rival Pultegroup ($PHM) also filed its 10-K, and didn’t use table format. Instead, Pulte described the same human capital information in written format:

On December 31, 2020, we employed 5,249 people, of which 945 were employed in our Financial Services operations. Of our homebuilding employees, 282 are involved in land acquisition and development functions, 1,752 are involved in construction and and post-closing customer care functions; 1,189 are involved in the sales function; and 1,081 are involved in procurement, corporate, and other functions. Our employees are not represented by any union. Contracted work, however, may be performed by union contractors. We consider our employee relations to be good.

So similar firms can take different approaches to the same disclosures. You’ll have to look carefully.

A More Extensive Example

If you want to see what maximal disclosure might look like, bounce over to the 10-K that Sirius XM ($SIRI) also filed on Feb. 2. That disclosure — nearly 1,100 words! — ranged from number of employees, to philosophy on corporate culture, to diversity and inclusion programs, to support for local COVID-19 relief measures.

Sirius didn’t include too many numbers, but did give glimpses into its human capital programs. For example, the firm included this about its corporate culture:

We are focused on creating a corporate culture of integrity and respect, with the goal of working together to drive our business to be creative, innovative and competitive. To achieve these objectives, we have adopted and regularly communicate to our employees the following core values, which we call “AMPLIFY”:

  • Applaud and encourage new thinking
  • Move forward and be purposeful in our desire to win
  • Prioritize honesty, integrity and respectful communication
  • Lean on each other and learn from one another
  • Invest in our actions and commit to the follow through
  • Find ways to give back by focusing on community and feeding your individuality
  • You Matter. We embrace our differences, empower each other and include everyone

We operate a performance-based environment where results matter and financial discipline is enforced. We have tried to create a highly collaborative culture in which employees feel a sense of pride that their input is sought after and valued. At the same time, we believe in holding individuals accountable and have tried to create a culture in which employees “do what they say they are going to do.” Still, we believe that our culture is a long-term competitive advantage for us, fuels our ability to execute and is a critical underpinning of our employee talent strategy.

Those are only a few of the disclosures that are pouring into the database these days. If researching that data is your bag — yep, Calcbench has it.


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