In 2018, the largest 500 companies had a ratio of intangible assets to market capitalization of 29.7%. companies had a ratio of intangible assets to market capitalization of 8.44%. Statistics cited by the SEC in an August 2019 proposal concerning human capital disclosures shows the importance of a focus on workers going forward.
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The Need for a Governance Focus on Human Capital Their savings have been depleted, and retirement is often out of reach. Eventually, the economy will rebound and businesses will need employees, but it may not happen soon enough for many workers. While the situation for workers will change once the immediate threat subsides, there is no clear blueprint for a post-pandemic economy, and many workers will likely face a difficult road forward. Workers who demand better conditions may also find themselves unemployed, leaving too many workers to choose between their health and their livelihoods. Even when workers have access to PPE, other safety demands, such as hazard pay and accessible paid sick leave, can provide real challenges. The personal protective equipment (PPE) that workers need to stay safe is in short supply, even for hospitals. While some of these job cuts are furloughs and not layoffs, for many workers, it’s a distinction without a difference: Businesses have no legal obligation to rehire furloughed workers.Įven those workers who are fortunate enough to keep their jobs can face hard choices.
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Unemployment claims pour in by the millions each week, and, even with some signs that pace is slowing, more than 30 million Americans are currently looking for work. Blackrock head Larry Fink wrote in early 2020 that “a company cannot achieve long-term profits without embracing purpose and considering the needs of a broad range of stakeholders.” He added that “companies may maximize returns in the short term,” but cautioned that “actions that damage society will catch up with a company and destroy shareholder value.”įast-forward three months, and we see workers losing their jobs at a record pace.
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The pandemic presents businesses with the opportunity to demonstrate that they may recover more quickly, and respond more positively to the economic downturn and to future disasters, if they proactively plan and engage in positive human capital development.įollowing on last summer’s Business Roundtable statement moving away from shareholder primacy, this year began on a high note for stakeholder governance. The pandemic has left many workers with few options and little hope that things will change any time soon.Ī short-term focus on corporate survival is understandable during such an emergency. Many have been laid off or furloughed, while others are forced to make difficult choices about their health and livelihood. The economic fallout has been hard on workers. The impact on human capital in a few short months has been devastating, however, as large and small companies alike have needed to shift from long-range planning to a short-term focus on survival and business continuity.
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Unlike natural calamities such as hurricanes and earthquakes, the coronavirus pandemic is leaving the nation’s physical capital structure intact.