DIVERSITY, EQUITY & INCLUSION: SEC Poised to Require HCM Disclosures as OFCCP Revisits Self Audits, Use of Pay Data

January 07, 2022

The expected SEC proposal on human capital metrics will likely include a mandate that public companies disclose diversity and inclusion demographics, reinforcing a growing investor interest that is already driving voluntary employer disclosures.

HCM disclosure rules expected this spring: The SEC's regulatory agenda includes proposed rules requiring disclosure of items such as workforce composition, diversity, cost and turnover, with a prescriptive approach the most likely.

Mirroring investor demands: Investors such as the New York City Comptroller’s Office and Arjuna Capital have conducted campaigns over the past two years to encourage companies to disclose their EEO-1 reports or face a shareholder proposal. Currently, more than 80 Fortune 100 companies disclose their EEO-1 reports and more plan to do so in 2022. This year, State Street Global Advisors will vote against the compensation committee chair of any S&P 500 company that fails to disclose its EEO-1 report. The Center On Executive Compensation, in conjunction with our Council on Inclusion and Diversity, will file comments on SEC diversity disclosure requirements when the proposal is released.

OFCCP to tighten requirements on pay equity self-audits, explore diverse practices: During an HR Policy webinar this fall, Office of Federal Contract Compliance Director Jenny Yang expressed strong support for employer pay equity self-audits. However, she indicated that the agency may eliminate attorney-client privilege and require employers provide audit results to make sure companies are addressing shortcomings. She also noted that OFCCP may check to see if the compensation committee and senior management have been briefed on results. OFCCP will also seek to learn best practices in expanding diversity from companies and potentially incorporate EEOC pay data (known as Component 2 Data) in conducting employer audits.

Get Involved – join our Council on Inclusion and Diversity: HR Policy’s Council on Inclusion and Diversity, chaired by Perry Stuckey, Executive Vice President and CHRO, Eastman, is focused on educating members and cultivating best practices to develop a sustainable approach to diversity, equity and inclusion, and advocating for sensible and effective disclosure. We encourage member CHROs and their heads of inclusion and diversity to get involved. Find more information here.