BlackRock has recently elaborated on what companies can expect when engaging with them on human capital management (HCM) matters, which BlackRock defines as including “employee development, diversity and a commitment to equal employment opportunity, health and safety, labor relations, and supply chain labor-standards, amongst other things.”

For industries and markets where talent is limited or constrained, BlackRock believes corporate strategies must address topics such as “how [companies] are establishing themselves as the employer of choice for the workers on whom they depend.” In these types of business environments, strong HCM can be viewed as a competitive advantage and a contributing factor to a company’s business continuity and success.

Role of the Board and Management. BlackRock believes boards must understand the opportunities and risks associated with HCM. Board oversight includes ensuring that HCM is effectively implemented throughout the company. Management must also include HCM as a central part of business operations.

Disclosure on HCM Risks. BlackRock recognizes that disclosure on HCM is still evolving and, depending on the market or industry, the impact from HCM risks may vary. Nonetheless, the firm “encourage[s] companies to aim over time to go beyond commentaries and provide more transparency. . . .” Although BlackRock notes its membership with the Investor Advisory Group of the Sustainability Accounting Standards Board (SASB) and references the SASB’s industry-specific HCM metrics, the announcement does not state that using the SASB reporting standard is required.

Likely Topics. BlackRock provides two lists of likely engagement topics, which are summarized below. When BlackRock believes a company fails to perform on HCM matters at a level comparable to the company’s peers, they will inform the company.

For Board

▪ Oversight of employee protection policies ▪Board and employee diversity ▪Oversee that HCM strategy is aligned to create a healthy culture
▪Consideration of HCM performance to executive compensation ▪Receipt by the Board of reports on integration of HCM risks into risk management ▪Director site visits

For Management

▪Encouragement of employee engagement programs ▪Health and safety programs ▪Monitoring turnover with focus on diversity metrics (gender, tenure, etc.)
▪Engaging with organized labor ▪Statistics on gender and other diversity factors regarding pay and promotions ▪Oversight of supply chain