Missing human capital data means annual reports are not providing a clear picture of the business, report states

Around a third (30%) of FTSE 100 companies are withholding relevant information from their annual reports and painting an inaccurate picture of opportunity and risk, according to a research report from the Valuing Your Talent partnership which includes The Chartered Institute of Management Accountants (CIMA), the CIPD, the professional body for HR and people development, and the Chartered Management Institute (CMI).

Reporting Human Capital: illustrating your company’s true value shows that many organisations are failing to include vital workforce related information, including health and safety incidents, data breaches, skills challenges and employee turnover in their annual reports, creating a clear risk to users of their annual reports, such as investors, the authors claim. Using a variety of methods, the report assessed the current standard of human capital reporting by FTSE 100 companies by measuring if and how corporate reports have evolved between 2013 and 2015.

The research found that overall the quality and quantity of reporting on human capital issues is improving – with an increase in reporting across ethics (up by 22%), diversity (up by 39%) and human rights (up by 127%) however the space dedicated to people welfare in some reports had reduced significantly with two in five companies scaling back the amount information they report on. The property and recreation sectors had seen the biggest increases in human capital reporting while banks have increased transparency after the recent financial crisis and PPI scandals.

The report’s authors also analysed the statements in the annual reports against human capital-related stories that had appeared in three media outlets:  the BBC website, Financial Times and The Economist. The research found that not all organisations were transparent about workforce issues in their corporate reports. For example, there were three cases of workplace strikes within the FTSE 100 companies reported on –  two of the strikes were fully reported on in annual reports but one case was not reported at all. There were also four cases of employees being involved with insider trading reported by the media outlets but none of these were recorded in the annual reports.

The study recommends that companies continue to focus on the reporting of human capital issues, but adopt broadly consistent terminology to describe the human capital items, thereby making universal comparison easier. This needed to be done without resorting to taking a boilerplate approach to human capital reporting. The report’s authors said the research findings show that companies are reporting many of the elements and metrics in the valuing your talent framework and this model could provide a useful foundation for human capital reporting in the future.

This research was conducted by Dr Martin McCracken, Professor Ronan McIvor and Mr Tony Wall of Ulster University Business School.

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