Blog : BOARD TALK
|Posted on June 1, 2016 at 9:55 PM|
I like headlines when they say it all. The one on this blog today refers to the current standard of human capital reporting by FTSE 100 companies. Because if business = its people, then companies need to join up the dots between that, transparency and disclosure. Except that sadly, they are either not aware, or not proactive in sharing their intelligence, it seems.
A third (30%) of FTSE 100 companies are withholding relevant information from their annual reports and painting an inaccurate picture of opportunity and risk, according to a new research report from the Valuing Your Talent partnership.It brings together CIMA, CIPD and the CMI.
Valuing your Talent: Illustrating your company’s true value, shows that many organisations are failing to include vital workforce related information, including health and safety incidents, data breaches, skills challenges and employee turnover in their annual reports. It says this is "creating a clear risk to users of these reports, such as investors."(my emphasis)
"The modern business landscape is increasingly made up of intangibles such as intellectual, social and brand capitals. People are central to these intangibles – they lead, manage and deliver businesses. By failing to properly account for the impact and value of people, there is a huge discrepancy between a company’s balance sheet and its market valuation" said Vince Cable, former UK Business Secretary, at its recent launch.
This report also highlights that some businesses may not be disclosing relevant information to minimise negative reactions from investors, he said.
"It shows a poor understanding of the significance of people-related data and the need for greater transparency. Having a clearer view of the people in our workforces can only be a good thing; it could lift the lid on our productivity issues and the skills challenges that are preventing so many businesses from reaching their potential" added Mr Cable. (my emphasis)
The report finds that between 2013 and 2015, the space dedicated to 'people welfare' in some reports has reduced significantly with two in five companies scaling back the amount of information they report on.
A comparison between company reports and media reporting "showed not all organisations were transparent about workforce issues in their corporate reports. For instance, there were three cases of workplace strikes amongst FTSE 100 companies in the media; two of the strikes were fully reported on in annual reports, one case was not reported at all. In total, there were four cases of employees being involved with insider trading in the media outlets but none of these were recorded in the annual reports" it says.
On the plus side, the quality and quantity of reporting on human capital issues is improving, it suggests - with an increase in reporting across ethics (up by 22%), diversity (up by 39%) and human rights (up by 127%).
Human rights is also the one out of those three potential reporting issues that has started being ranked, globally for listed companies.
"Banks have increased transparency after the recent financial crisis and PPI scandals" says the report. It also reveals that companies working in the areas of property and recreation saw the biggest increases in human capital reporting in that time period.
"The Number One driver of productivity and business growth is the quality of management and leadership, because that is critical to how far organisations get the best from their people" said Ann Francke, Chief Executive of the CMI.
"But if managers don't have sight of good people measures, they have a huge blind spot about performance and can't make the best decisions about their business" she added.
I would suggest another word that might be relevant to this 'not taking people into account' oversight: millenials. Can't see them putting up with it, frankly.
The Valuing Your Talent framework is intended to give managers a clear model for talking with colleagues in HR and Finance about what they need to measure and report when it comes to their people. Read it, FTSE 100 - quickly.