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Investors still left in the dark on human capital in corporate reporting

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The Pensions and Lifetime Savings Association (PLSA) has today published its toolkit, ‘Understanding the worth of the workforce’, designed to provide pension schemes and investors with guidance on what data and commentary they should request from the companies in which they invest. 

UK pension schemes invest billions of pounds in listed companies around the world to secure pension incomes for millions of savers. There is a growing recognition that companies committed to investing in training and development for their staff − and ensuring they feel secure, empowered and fairly treated in their jobs − perform better over the long-term. Clear, consistent and structured reporting about how companies manage their workforce is a vital component in allowing investors to understand how the asset of employees is being managed and developed.

The toolkit recommends pension schemes ask investee companies to report on the follow metrics as standard:

  • Gender diversity
  • Employment type (eg full time, part time, agency)
  • Staff turnover
  • Accidents, injuries and workplace illnesses
  • Investment in training and development
  • Pay ratios (across highest, median and lowest quartiles)
  • Employee engagement

Luke Hildyard, Policy Lead: Stewardship and Corporate Governance, Pensions and Lifetime Savings Association, said: “We are all familiar with the phrases in annual reports affirming how important employees are to corporate success. But as our report last year highlighted, too often there is too little information in those same reports about how these employees are managed, developed and valued. This toolkit has been designed to provide pension schemes and other investors with a clear and structured approach to interrogating the data already available in corporate reports and guidance on what other information to request and how to analyse it. 

“Existing and pending reporting regulations will provide some further insight into this area of corporate reporting but we believe this will be of greatest value when seen in the context of a company’s culture and working practice. With this in mind we suggest an approach which uses a narrative reporting style that balances data with rationale or context.” The toolkit builds on the Association’s report ‘Where is the workforce in corporate reporting?’ published last year; following the publication of that report the Association set up a series of discussions with members, their advisers and asset managers along with other experts and corporations themselves. These discussions informed the recommendations in the toolkit published today. The toolkit will be shared with both corporations and pension funds. The Association also intends to arrange private meetings between its members and investee companies to discuss how the toolkit’s recommendations can be implemented over the long-term.

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