Human Capital Strategy Disclosures Under Regulation S-K: A Tale of Three Companies

The SEC’s Release No. 33-10825, Modernization of Regulation S-K Items 101, 103, and 105, took effect on November 9. Recently, I went over the final rules for Item 101(c), which includes disclosure of the company’s “human capital resources to the extent such disclosures would be material to an understanding of the organization’s business.” Today I’d like to take a closer look at three companies that already have adopted the new 101(c) standard in their 10-K filings, including the implications that their choices may have for your own firm.


Starbucks’ human capital disclosure

  • Discussion of board oversight process on broad human capital matters
  • Commitment to ongoing employee surveys on topics like confidence in company leadership, career growth opportunities, and benefits—along with a commitment to sharing the results in order to highlight improvement areas
  • Overview of total rewards strategy, including comprehensive health insurance coverage for employees working over 20 hours per week, the Starbucks College Achievement Program (tuition coverage), parental leave, and more
  • Investment in training and development, with a focus on safety and security, customer engagement, anti-bias coaching, and more
  • Commitment to and success in achieving 100% pay equity in the US, in addition to China and Canada; commitment to do so in all “company-operated markets”
  • Global workforce breakdown:
    • 349,000 total headcount
    • 228,000 employees in the US
    • 8,000 employees in US corporate roles
  • Limited number of employees represented by unions


Starbucks is a consumer staples and consumer discretionary company, benchmarking itself against the likes of McDonalds, Target, Kellogg, and PepsiCo. Much of their revenue comes from retail stores, which are traditionally known to face major labor challenges.

From an investor perspective, a retail company’s ability to attract and retain its labor force at a superior rate relative to peers is a leading indicator of competitive advantage. For example, lower turnover means better customer experiences (less service disruption), reduced staffing costs (turnover is expensive), and more revenue (more cumulative training translates into higher consumer share of wallet). Diversity at senior levels means enhanced empathy toward the buying patterns of the full universe of potential customers; diversity at the retail level means customers are more likely to see themselves behind the counter. The analysis can go on and on, but in short: Better training, lower turnover, fewer safety incidents, and cross-organization diversity are all good for growth.

One area that’s lighter is specific metrics on diversity or other factors of interest. However, as we’ll share in our next article, “Human Capital Management: Deciding What to Disclose in the 10-K,” it’s important to not prematurely disclose a metric that hasn’t been rigorously vetted for which a controlled calculation process exists. We might therefore see additional metrics appearing in future years as time passes to get comfortable with which metrics apply and how they will be sourced within the organization.

A very appealing feature of Starbucks’ disclosure is its credibility-enriching specificity, such as the detail they disclose on their college tuition reimbursement program. This program hits close to home with me because it’s a partnership with Arizona State University, one of my alma maters. Starbucks launched its program in 2014 (with a starting cohort of over 4,000 Starbucks employees) and continues to deliver exceptional results. Concrete programs reflecting strategic investments that can be linked to key human capital outcomes go a long way toward telling a positive story.


Visa’s human capital disclosure

  • Safety protocols implemented for those not able to work remotely
  • Commitment to no layoffs in 2020 related to COVID-19
  • Employee headcount increase from 19,500 to 20,500
  • Voluntary turnover (rolling 12-month attrition) of 6.3%
  • Global workforce demographics:
    • 59% male, 41% female
    • Women represented 34% of leadership
    • US ethnicity breakdown: 38% White, 42% Asian, 11% Hispanic, 6% Black, and 3% other
    • US leadership: 63% White, 19% Asian, 12% Hispanic, 4% Black, and 2% other
  • Commitment to increase the number of employees from underrepresented groups in US leadership roles by 50% in three years and the number of US employees from underrepresented groups by 50% in five years
  • Examples of strategies for driving improved diversity and inclusion
  • Commitment to pay equity and conducting a pay equity analysis annually


The hallmark of Visa’s disclosure is the organization’s willingness to publicly disclose future diversity and inclusion targets. It’s one thing to claim that diversity is a priority and programs exist to support the cause. It’s something entirely different to put quantitative targets in a publicly filed document. We don’t expect many companies to go as far as Visa did, which means the company has both a unique edge with investors and a rigorous yardstick for tracking progress.

Another example is Visa’s willingness to disclose their 6.3% voluntary turnover rate, which draws a similar line in the sand and may prompt investors to demand similar information from peer firms. This has implications for the decisions peers make in the upcoming months. For example, because Discover Financial won’t file its first 10-K under the new rule until 2021, it will need to decide whether to match Visa’s disclosure in the level of detail provided. Discover’s prior disclosure under the old rules was as basic as everyone else’s: “As of December 31, 2019, we employed approximately 17,200 employees.”

Although Discover does communicate their ESG priorities, information filed in the 10-K takes on a greater formality. It also has higher legal risk since many rely on the 10-K for investment decisions. So while many companies offer passionate and elaborate disclosures in their corporate social responsibility reports, it’s a non-trivial decision as to how much should be replicated on the face of a 10-K.

Let’s focus for a moment on Visa’s bold decision to commit to specific diversity levels. This has a couple of implications:

  • It entitles analysts and investors to ask Visa for updates and expect annual progress disclosures against these goals.
  • That further obligates Visa to make investments that effectuate progress and—to the extent all parties believe diversity and inclusion drive shareholder value in the long run—are accretive. At the same time, cascading these goals throughout the organization will be a non-trivial feat.
  • Meanwhile, analysts and investors can ask Visa’s competitors about their goals. If they decline to reveal them, they may be asked why. Either way, competitors may find themselves at a disadvantage if they can’t show comparable progress.

These actions and incentives are bound to have some impact on asset pricing. What makes Visa’s disclosure so unique is its public commitment to a future goal, which implies there’s no room for mere lip service on diversity and window dressing on the disclosure. At the same time, there are good arguments for avoiding public commitments, especially when the road to achieving those goals is not yet clear. We discuss those tradeoffs in “Human Capital Management: Deciding What to Disclose in the 10-K.”


Dolby’s human capital disclosure

  • Global headcount of 2,289, of which 1,037 are outside the US
  • No employees are represented by unions
  • Commitment to professional development and leadership programs
  • Commitment to “understanding diversity and inclusion strengths and opportunities and executing on a strategy to support further progress”
  • Creation of employee networks focused on key diversity categories (e.g., gender, ethnicity, sexual orientation)


Compared with some technology giants, Dolby’s disclosure is relatively minimalist. Some may even consider it too thin.

We disagree. Smaller companies like Dolby can be just as committed to diversity and inclusion as their larger counterparts, and a lighter 10-K disclosure isn’t necessarily evidence of diluted goals. Remember, this is about 10-K disclosure on a topic that is not as objective and readily quantifiable as a metric like inventory turnover. The tricky thing with the disclosure omelet is it’s hard to unscramble after it’s served, which is why graduated approaches are often preferred.

The strategic choice that companies face is what incremental information to share in their 10-K. When companies alter the direction of a disclosure or change their minds on what to share, this can result in negative spin even though the motivation may have been entirely benign or unrelated. Data and tracking methodologies for human capital topics such as diversity, equity, and inclusion are multi-dimensional and complex, suggesting that calculation approaches will change as companies gain experience. (For a brief foray, read our issue brief.)

Before putting some of the more involved metrics in the 10-K, we would expect at least a couple of years of tracking, back-testing, and internal monitoring. Not only do management and the board need to ascertain which metrics apply most to the business, but they also need to get comfortable with the calculation methodologies, how sensitive the results are to operational changes, and what constitutes reasonable goal-setting.

We read Dolby’s disclosure as evidence that they’re in the midst of an internal dialogue and that enhanced disclosure is coming—maybe not next year, but certainly not never. Generalizing, we expect to see smaller companies making major investments in their internal monitoring while taking a more graduated approach toward 10-K disclosure.

As we help companies develop monitoring and dashboard processes, the focus is on determining what metrics matter the most, the underlying assumptions behind each, and factors that drive change. In my next article, “Human Capital Management: Deciding What to Disclose in the 10-K,” I’ll introduce a framework for deciding how to structure your own organization’s disclosure.