Making Sense of SEC's Proposed Human Capital Disclosures.

When it comes to the environmental, social and governance movement, Securities & Exchange Commission Chairman Jay Clayton acknowledges the growing drumbeat for ESG reporting standards. But he cautioned against lumping all things ESG together because it could muddy the disclosure waters for investors.

On the human-capital side of ESG, however, his agency has been evaluating whether a revamp is needed. "Our current disclosure requirements date back to a time when companies relied significantly on plant, property and equipment to drive value," Clayton told Directors & Boards in a recent in-depth interview.

To that end, last week the agency released proposed new rules to update risk disclosures.

Some highlights from the proposal include:

* clarify and expand its principles-based approach, by including disclosure topics drawn from a subset of the topics currently contained in Item 101(c);

* include, as a disclosure topic, human capital resources, including any human capital measures or objectives that management focuses on in managing the business, to the extent such disclosures would be material to an understanding of the registrant's business, such as, depending on the nature of the registrant's business and workforce, measures or objectives that address...