Readings / Materiality of Human Capital Metrics | Standards Michigan

Readings / Materiality of Human Capital Metrics

“If I had to run a company on three measures, those measures would be customer satisfaction, employee satisfaction, and cash flow.” — Jack Welch, Former General Electric CEO.

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Readings / Materiality of Human Capital Metrics

August 7, 2019
mike@standardsmichigan.com
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Famous People Painting – Discussing the Divine Comedy with Dante

 

Materiality of Human Capital Metrics

Lee S. Webster | University of Texas Medical Branch

 

Since the advent of scientific management in the late 19th century, investors have remained unpersuaded if not dismissive of human capital measures when determining the cumulative financial value of publicly traded companies. This reluctance stems from a perceived arbitrariness and empirical uncertainty that has attached to the measurement of workforce contributions to organizational value. Past critics of the use of human capital metrics frequently claim these measures are unproven, unserious, and immaterial disclosures that fail to meet the standard of relevant information for investors to consider. Contemporary management and investment experts challenge that reasoning and offer a more expansive and inclusive perspective of what investors need to know to make informed decisions. The publication of ISO 30414:2018 Human resource management* recommends that stakeholders revisit the relevance of human capital measurement in both American and international board rooms, investment banks, regulatory agencies, and security markets.  These stakeholders now have the means to explore whether human capital measures can provide faithfully and rigorously derived material information for investors.

 

Human resource management — Guidelines for internal and external human capital reporting

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