Fuller Disclosure Is on the Way


Although the state of reporting on intangibles is generally poor at this time, the future looks promising. This must be the case because of the growing impact of knowledge, relationships, intellectual capital, and other intangibles on the fortunes of enterprises. Academics, the U.S. Securities and Exchange Commission, and investor groups are pressing to make intangibles more tangible for the investing public.

The term full disclosure will take on a broader meaning. Information about human assets, which once was the domain of socially conscious investors, has a growing constituency in the financial community. Although the information being sought today is superficial, this may be a function of the paucity of solid reported data about human capital and the ways corporations measure and manage it. However, with the growing pressure for greater disclosure, we expect this situation to change.

As human capital data become more readily available, count on financial analysts to develop methods for integrating them into investment decisions. The greatest challenge will be knowing which of many possible measures are truly indicative of a firm’s ability optimize its human capital. Finding the right measures for each company’s unique context will be the key to better investment decisions.

If you are a CEO or financial executive, you might do your share price a favor by getting ahead in the disclosure game. Here are two things you should do:

  1. Remember that investors cannot act upon what they cannot see or understand. Thus, if you are building the value of your human capital assets progressively but are not disclosing them, don’t expect investors to reflect that progress in your share price. If you’re treating human capital as a key asset, share the news. Your competitors cannot easily use that information to imitate you (and do so at their peril), but investors can use it to value your organization appropriately.

  2. Get the facts and report them to investors. Understand the strengths and weaknesses of your company’s internal labor market and communicate how you are implementing the changes needed to overcome any weaknesses. Develop solid metrics, track them, and report them. In particular, get the facts on what attributes and practices contribute the most to important outcomes for your business. Communicating that information to investors can truly differentiate you and your firm from the crowd.




Play to Your Strengths(c) Managing Your Internal Labor Markets for Lasting Compe[.  .. ]ntage
Play to Your Strengths(c) Managing Your Internal Labor Markets for Lasting Compe[. .. ]ntage
ISBN: N/A
EAN: N/A
Year: 2003
Pages: 134

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