"Human capital management spotlight series - Part I - Humans: the mission critical asset" from Freshfields Bruckhaus Deringer explains why companies should prioritize the development of, and communicate publicly, a human capital management strategy and associated board oversight notwithstanding multiple other pressing issues. The potential implications of not doing so include votes against directors, targeted shareholder proposals (which are increasingly garnering more support), shareholder and employee activism, and consumer boycotts and protests.
Effective board HCM oversight, which the major institutional investors - among others - are prioritizing and expect to see at their portfolio companies, requires that management "(a) provide the right information to the boardroom to enable oversight, (b) determine how best to involve boards at the right level of decision-making, and (c) strategically deploy directors, individually and in the aggregate, to demonstrate the company’s genuine commitment to these issues."
As is the case with other topics of intense interest and scrutiny, if the company fails to take the lead and tell its own HCM story, others will likely fill in the blanks with a narrative that may place the company in an unflattering defensive position. The firm's next memo in the series - which we will report on next week - will focus on the practical elements of developing an HCM strategy and demonstrating the company's commitment.
See our recent reports: "Small Companies: Human Capital Management Governance Strategy" and "Human Capital Management: Board Oversight" and additional information & resources on our Human Capital/Workforce Management page. This post first appeared in the weekly Society Alert!