COVID-19: The Issue Clearly is Human Capital

COVID-19: The Issue Clearly is Human Capital

Fulcrum Partners. Fulcrum Partners News

COVID-19 has painted a crystal-clear picture of the critical value of human capital. And with this heightened awareness comes an accelerated pace for new human capital governance. 

But even before the global pandemic abruptly redefined just about everything, Attorney Mike Melbinger, a partner in the Chicago offices of Winston & Strawn, and others were already taking note of the developing sentiment that matters of human capital management should rest squarely on the shoulders of Compensation Committees. (See: Should Compensation Committees Take on the Responsibility of Human Capital Management?, published June 2019)

Inherent in human capital management are new levels of responsibility for oversight, accountability, and compliance. The Securities and Exchange Commission (SEC) recommended that human capital metrics be disclosed in public findings months before anyone had proclaimed the message of “unprecedented event” and the reminder that “we’re all in this together.”

The following is an insightful excerpt from Mike’s recent blog post: “Compensation Committees and Human Capital Management – Get Ready for Your Close-Up”. His point is well made. If Compensation Committees were not already profoundly aware that the future success of organizations lies in attracting, retaining, and appropriately rewarding key talent, then surely the “COVID economy” is making this point patently evident.

From the Executive Compensation Blog:

 

“…Unique among the stock market crashes and economic crises of the past 90 years (and no, I haven’t been practicing law during all of them), the current pandemic has brought to the fore human capital issues rather than financial or economic ones. Since the spotlight is on human capital management issues, and someone has to assume the responsibility for them, those compensation committees that have not already assume the responsibility for human capital management may revise their committee charters, adopt principles, and do so.

One of the best discussions I have heard on this subject was Willis Towers Watson’s recent webcast. The WTW presentation begins with five key points:

  1. Current economic downturn is human capital driven, not financial or market forces driven
  2. Reduced capacity of workers to do their jobs is reflected in the rapid stock market decline
  3. Economic value will be restored through collective efforts of investors, consumers, and employees
  4. Investors are looking closely to boards and companies on managing human capital risks and implications through the COVID-19 crisis
  5. Boards are increasingly being asked to effectively oversee human capital issues and support discussions with shareholders

For further guidance on the types of measurable factors subsumed within the category of human capital management, committees also should look to the Recommendation from the SEC’s Investor-as-Owner Subcommittee on Human Capital Disclosure, and the Human Capital Management Coalition’s petition to the SEC, and the SEC’s own disclosure proposals on the subject.”

#COVID19 #compensationcommittee  #humancapital #employeeretention 

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein.

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