BlackRock Announces Its Human Capital Metrics Engagement Priorities for 2018
March 23, 2018
Following up CEO Larry Fink's January letter to CEOs, which focused on corporations' responsibility to a broader group of stakeholders, BlackRock unveiled its Investment Stewardship team's thinking on "management of employees as an investment issue" which it will incorporate in its engagement with companies in 2018. The document cites the importance of talent management and references several studies to support its approach, noting that "[c]ompanies included in Fortune magazine's '100 Best Companies to Work For' lists earned, over the long-term, excess risk-adjusted returns of 3.5 percent." It further observes there is a positive correlation between human resource initiatives and financial metrics such as total shareholder return. The document states that when engaging with directors, BlackRock will focus on issues such as:
- Oversight of policies meant to protect employees such as EEO, codes of conduct, and whistleblowing;
- How the board oversees "how the many components of a company's HCM strategy align themselves to create a healthy culture and prevent unwanted behaviors;"
- Board and employee diversity; and
- Consideration of "linking HCM to executive compensation to promote board accountability."
The document also notes that BlackRock's governance team may engage management on issues such as:
- Policies to encourage employee engagement outcomes and key drivers (e.g., rewards policies);
- Voluntary and involuntary turnover;
- "Statistics on gender and other diversity characteristics as well as promotion rates for and compensation gaps across different employee demographics";
- Programs to engage organized labor (where relevant); and
- Systems to oversee the supply chain, including contingent workers, contractors, and subcontractors.
The statement, which is the most explicit from a large index fund, also makes direct reference to the Sustainability Accounting Standards Board's industry-specific HCM metrics as a source for company information.