more-arw search

Human Capital Reporting Debate Gets 'New' Perspective

One economist recently highlighted an approach to financial reporting for huma

Companies often look to some interesting sources for new business ideas. Recently, economics professor John Boudreau took to CFO.com to highlight an interesting approach to financial reporting standards for human capital that has its origins in the 1700s.

Those with accounting jobs may be familiar with the standards debate to which Boudreau is referring in his piece: The Society for Human Resource Management has issued a set of financial reporting standards that, among other things, call for companies to report on their ability to retain talent, leadership depth and quality, and employee engagement. The Human Resources Policy Association, meanwhile, has denounced the rules, calling them excessive and irrelevant.

As Boudreau wrote, the nonconformist minister Thomas Bayes, who lived during the 18th century, said that "the value of information is greater when it is more likely to change a decision, when being wrong has large consequences, and when the decision-maker is capable of acting on it and willing to do so." As such, human capital reporting should take a new approach, he said.

Boudreau suggested that considering information regarding the ways in which the HR data might alter potential investors' decisions or how investors might react to a lack of new information would add relevant analysis to the debate over the standards.