Investor interest in human capital issues up, say IROs

Mar 03, 2021
Human capital management is an important factor for many investors

Investors are increasingly interested in human capital management (HCM) issues, according to new research from IR Magazine.

Most IR teams say they have seen an increase in interest in HCM over the past two years, notes the Human Capital Management report. In fact, more than three quarters of IROs say they’ve been asked about these issues – which cover all of a company’s personnel decisions, from the selection of senior management to labor practices within its supply chain – by investors during that time.

Rating the importance of HCM within a company they’re looking to take a position in from zero to 10, more than six out of 10 investors say these issues are important to them. Almost 40 percent say HCM is ‘very important’, giving it a score of eight or more.

Researchers further asked investors about the importance of HCM issues in a company’s supply chain, and more than a third say it is ‘very important’ with a rating of eight or more. As HCM covers such a wide area, investors also share their views on what topics they consider most important both within the company and the supply chain.

The report brings together responses from both IR professionals and the investment community on HCM and, while most views are largely aligned, there are some differences. For example, diversity is the most common HCM issue IR teams say they hear about, while investors say they ask most often about pay & compensation.

Researchers asked investors to comment on the importance they attach to HCM. Below is a selection from those published in the report:

  • ‘Human capital management is a key unambiguous and verifiable indicator of how seriously companies are embracing ESG’ – sell side, US
  • ‘Well-run companies, which is what we invest in, already do this without announcing it. It is just one facet of their good governance practices’ – buy side, US
  • ‘Labor relations and ESG practices have been given more focus in our interactions’ – buy side, Asia
  • ‘I’d view it as indirectly important, but it’s not a factor I normally assess independently. Credibility of any human capital management reporting would be an issue’ – sell side, Europe
  • ‘Human capital management in the supply chain can be very important in order for you to better understand how companies work’ – sell side, Europe

Click here for more information and to download your copy of the Human Capital Management report.

The pandemic effect 

‘Despite initial claims the pandemic and associated economic turmoil would cool interest in ESG issues, the reverse appears to have happened – with a particular focus on social issues such as HCM as companies tackle employee safety and the future of work,’ wrote Ben Maiden, editor-at-large of Corporate Secretary, online sister publication to IR Magazine, in August 2020.  

As companies furloughed staff and workforces moved to the home office as a result of lockdowns, companies began to focus more on HCM issues.  

Joanna Daly, vice president of compensation, benefits, corporate health & safety and HR business development at IBM, told Maiden the pandemic had forced the firm to move 95 percent of employees worldwide to working from home within two weeks. This went smoothly, partly because the firm had been investing in tools to enable remote working, Daly said. Since then, her team has taken the pulse of the workforce through polls asking such questions as ‘How are you doing?’ and ‘Are you getting the support you need?’ 

Jennifer Warren, CEO for issuer services in North America at Computershare, said the company’s clients had been taking the initiative and talking about HCM issues – particularly as they related to Covid-19. ‘In their presentations, almost all our clients are proactively addressing how they are operating during the pandemic, including outlining steps they have taken to protect the health and safety of employees,’ she said. ‘Investors also took the opportunity to ask questions about the impact of the virus on employees, both on their health and on long-term implications around employment practices.’ 

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