Lawmakers Weigh in on Anticipated SEC Rules on Human Capital Metrics

In anticipation of an SEC proposed rule requiring the disclosure of prescriptive human capital metrics, congressional lawmakers on both sides of the aisle are weighing in on the issue. Just this week, Congresswoman Maxine Waters (D-CA) and Senator Sherrod Brown (D-OH) sent a letter to SEC Chair Gary Gensler urging standardized disclosure of gender, race/ethnicity and disability data (including supplier data) to help investors make informed decisions. In February, Senators Sherrod Brown (D-OH) and Mark Warner (D-VA) wrote a letter to Gensler suggesting that human capital disclosures additionally include information about a company’s independent contractors.

In response to the request for including independent contractor data, Senators Pat Toomey (R-PA), Richard Burr (R-NC), Mike Crapo (R-ID) and Mike Braun (R-IN) sent a letter to Chair Gensler calling on the SEC to respect the jurisdictional boundaries established by Congress during upcoming rulemakings on human capital, including with regard to independent contractor disclosures.   The letter explained why the SEC has no jurisdiction over independent contractor status, with labor considerations being explicitly the dominion of the Department of Labor, the National Labor Relations Board, and, as it relates to taxes, the Internal Revenue Service.    

The letters from Democratic lawmakers reiterate the view of the pension fund-led Human Capital Management Coalition that the SEC’s current, principles-based human capital metrics rules are insufficient. Chair Gensler has indicated the SEC will likely produce a more prescriptive set of rules requiring quantifiable data on turnover, skills and development training, compensation, benefits, health and safety, and workforce demographics. 

The Center continues to strongly promote a principles-based rule, discouraging overly prescriptive metrics, in our frequent communications and meetings with SEC Commissioners as well as rulemaking staff regarding the anticipated HCM rule. We will submit detailed comments once a rule is proposed.