Workforce Diversity Disclosures on the Rise Amid Expected SEC Rule

Just Capital published its latest report on workforce diversity disclosures, noting that companies disclosing their EEO-1 report (what Just Capital refers to as the “gold standard” in diversity disclosures) more than tripled between 2021 and 2022. 34% of the Russell 1000 now discloses their EEO-1 report publicly, while 22% disclose detailed race and ethnicity data in another form and 16% disclose aggregate “people of color” data.  

In a companion analysis, Just Capital looked at shareholder returns of companies disclosing EEO-1 data and found that those companies outperformed non-disclosing companies by 7.9% over the trailing one-year period ending in 2022 (see report here). Although this can hardly be called proof that more diversity disclosure leads to better business outcomes, it will form part of the business case that activist investors and other stakeholders present to companies when demanding more detailed diversity disclosure. The NYC Comptroller and Retirement Systems released a joint report at the end of last year detailing a very successful shareholder campaign to increase disclosure, resulting in over 90% of S&P 100 companies releasing their EEO-1 report.  

Outlook: The SEC is targeting rulemaking on human capital disclosures as early as this month, according to the latest regulatory agenda. In anticipation of a proposed rule, HR Policy Association’s Center On Executive Compensation met with SEC commissioners and their staff last year and discouraged the Commission from pursuing a prescriptive HCM rule. In the meantime, Chair Gensler has indicated he is seriously considering acting on the June 2022 petition of the Working Group on Human Capital Accounting Disclosure, which called for rulemaking on new human capital accounting disclosure requirements. This could mean that standardized accounting will be included in any proposed HCM rules this spring. The Center will submit comments incorporating member feedback to the SEC once a proposed rule is published.