Key findings from a survey of public company directors.
The focus on human capital and talent in corporate governance is intensifying, as more stakeholders—led by large institutional investors—seek to understand how companies are integrating human capital considerations into the overarching strategy to create long-term value. After all, a company’s intangible assets, which include human capital and culture, are now estimated to comprise a significant portion of a company’s market value.
Many influential groups have identified human capital as a key driver of long-term value. Recent developments reflect a clear and growing market appetite to understand how companies are managing and measuring human capital. This includes influential investors making human capital an engagement priority with directors, as well as comment letters from various stakeholders to the U.S. Securities and Exchange Commission supporting greater human capital disclosure and asserting the importance of human capital management in assessing the potential value and performance of a company over the long term.
At the same time, there is an ongoing cultural shift brought about by new generations of workers, digitization, automation and other megatrends related to the future of work. In this new era, it is critical for management teams and boards to keep pace with this transformation and consider redefining long-term value and corporate purpose. Creating value for multiple stakeholders, including employees, will ultimately help build and sustain shareholder value over the long term.
To better understand where companies are on this journey, Corporate Board Member, in partnership with the EY Center for Board Matters, surveyed 378 U.S. public company board members in the fall of 2019. Our key findings are outlined below.
The findings in this report are based on a survey conducted prior to the coronavirus pandemic, which has intensified the focus of key stakeholders’ on how companies value, invest in and protect their people, culture and communities. The rise in virtual working requires management teams and boards to keep pace with rapid transformation while considering the potential human capital-related risks and opportunities that may arise from this shift.
As companies emerge from this crisis, so will the workforce. Companies can look to enhance people engagement and productivity together with corporate long-term value. They can do this by designing a more skilled and nimble workforce and a flexible reward framework that includes not only financial compensation, but also benefits that promote financial, physical, social and emotional well-being.