This Article explores the evolution of human capital disclosure—firm-supplied information about various workforce-related matters—as a factor in contemporary corporate governance. Regulatory and nonregulatory developments from recent years have upended longstanding practices and generated extensive new evidence. Most notably, the Securities and Exchange Commission (SEC) adopted a human capital management (“HCM”) disclosure mandate in 2020, which, though long overdue, was criticized from the outset for its modest scope and lax design. In the meantime, courts have taken a renewed interest in board of directors’ oversight responsibilities in a number of areas, including HCM, while labor’s power has unexpectedly increased in some areas and decreased in others. HCM-focused shareholder proposals have proliferated and now cover a range of heretofore unexplored topics. This dynamic new landscape raises important analytical and normative questions: Has the SEC’s disclosure intervention from 2020 been effective and, if not, what should a revised HCM disclosure framework look like? More broadly, does the increased visibility of labor in corporate filings indicate that its role and status within corporate governance, which had been static for decades, have now changed?
To answer these questions, the Article examines six complementary types of evidence selected through an original “mixed methods” research design—a methodological approach popular in the social and behavioral sciences but underutilized in corporate law. The new evidence includes: (1) a meta-analysis of large-scale quantitative studies examining the incidence and characteristics of HCM disclosure; (2) hand-collected data from the SEC review process for initial public offering (“IPO”) filings; (3) an original case study showing the existence of material disclosure gaps in regulatory filings; (4) evidence from HCM-related shareholder proposals; (5) evidence from recent labor market developments; and (6) a new line of Delaware fiduciary duty cases focused on board oversight of “mission-critical” matters. While these six lines of inquiry in isolation offer only fragmented depictions, combining them through the mixed methods approach generates a more nuanced and comprehensive picture that can inform both policy and academic discourse.
The principal implications are twofold. With respect to securities law, the analysis highlights the need for a revised HCM disclosure framework that: (1) elicits more detailed, standardized, and, where appropriate, quantitative information; (2) covers both traditional employees and the so-called shadow workforce comprised of contingent workers; and (3) pays much-needed attention to the complementarities and substitutability between human capital and AI-enabled technology. With respect to corporate governance writ large, the analysis underscores the enduring precarity of labor’s status within the firm, which will likely be deepened by the AI revolution.