Corporate Human Capital Disclosures : Early Evidence from the SEC’s Disclosure Mandate

In November 2020, the SEC issued amendments to Regulation S-K requiring filers to provide expanded discussions related to the firm’s human capital (HC). This study provides the first large-sample descriptive evidence related to the resulting HC disclosures during the first year of the regulation’s implementation. Our findings confirm that, in the absence of detailed guidance under the principles-based regulation, filers’ HC disclosures are extremely heterogeneous in terms of their length, numerical intensity, tone, readability, and similarity with peer firms. The disclosures tend to be very positively-toned and inherit many of the properties of the firm’s other Item 1 disclosures. Consistent with investor complaints, the disclosures are generally not numerically intensive. Firms for which HC is strategically important do not provide superior disclosures, and time trends suggest that firms have learned over the first year of the non-directive regulation to provide disclosures that are longer and more optimistic, but less informative (i.e., more similar or boilerplate, less specific, and less numerically intensive). Overall, our comprehensive evidence validates concerns regarding the heterogeneity (i.e., lack of comparability), lack of specificity, and dearth of numerical disclosures being provided under the new principles-based rules