Companies should disclose human capital and workforce compensation data to mitigate human rights risks, according to State Street Global Advisors’ (SSGA) latest whitepaper, published January 7.

Following more than 180 engagements with international companies on their human capital management policies, SSGA identified that boards made significant progress in mitigating diversity concerns in 2021, with racial equity at the “top of the agenda” following the 2020 Black Lives Matter Protests.

In contrast, the fund manager found that policies concerning modern slavery and employee engagement were lacking. As such, SSGA updated its best practices for portfolio companies to mitigate human capital-related risks.

SSGA encouraged more companies to disclose their workforce composition data, broken down by full-time, part-time, and contingent labor. Without transparent workforce disclosure, a company’s structure can “create and exacerbate risks,” the fund manager said.

SSGA revealed that conversations with publicly-traded real estate investment trusts (REIT) “left us unsure about our exposure to human capital risks, [with] many seem[ing] less concerned with any responsibility for managing employee engagement and satisfaction.”

Similarly, “gig economy” platforms and employers that opt for a “fissured” workforce model may be “obscuring” workforce-related risks that could be managed more closely, SSGA said.

Employee compensation was also identified as an area where shareholders would benefit from enhanced disclosure. Investors are given “enormous detail regarding executive compensation plans, but little, if any, disclosure when it comes to the compensation of other employees throughout the organization.”

SSGA emphasized the importance of boards identifying which committees are responsible for the oversight of human capital management so shareholders can effectively raise queries and concerns.

In the U.S., most companies described human capital management as being primarily under the purview of the compensation committee but responsibility extended to the remuneration, audit, and nominating and governance committees in some cases.

SSGA expects companies to establish key performance indicators (KPI) that measure the effectiveness of its initiatives. Companies with high-risk supply chains should also disclose the number of modern slavery incidents identified and remediated, it said.

Investors would also benefit from “additional insights” into how boards connect with and learn from employees, SSGA said, whether this is through regular site visits or other methods to solicit employee input.

Companies in Europe are more likely to describe “specific and systematic mechanisms” for directors to engage with employees, the fund manager revealed, whereas U.S.- and Asia-Pacific-listed companies failed to specify formal human capital management frameworks.