On November 15, 2017 the Pensions and Lifetime Savings Association (PLSA) published new research on corporate reporting of workforce-related issues. The research, carried out by Lancaster University Management School, examined the annual reports of FTSE 100 companies to see how they explain their employment models and working practices in relation to company strategy, and what performance measures they use to underpin the narrative reporting. The research was based on the framework set out in the PLSA’s stewardship toolkit published in 2016.
The findings include the following:
Composition – make-up of the company’s workers and terms on which they are employed
- 64 per cent of FTSE 100 companies provided some narrative commentary on the composition of their workforce in corporate reporting.
- 99 per cent of companies provided data on gender diversity in the workforce but only 15 per cent provided data on ethnic diversity of their workforce.
- All companies addressed the pay ratio of their CEO’s compared with other executive directors, but only 7 per cent addressed the pay ratio between the CEO and the average or median worker (although, this will soon be a legal requirement).
- Only 4 per cent of FTSE 100 companies provided a breakdown of their workforce by full time and part time workers.
Stability – how stable and secure the current workforce is, and how it might change over time
- Stability was the least discussed in corporate reporting out of the four themes covered (the others being composition, skills and capabilities and engagement and voice). Only 10 per cent of companies provided meaningful narrative commentary.
- 18 per cent of companies provided figures on staff turnover.
- Statistics on accidents in the work place differed between sectors, with high risk sectors like mining or construction providing more detailed disclosures. 52 per cent of companies provided at least one metric in this respect, the most commonly reported being deaths in the workplace (34 per cent), accidents in the workplace (32 per cent) and time lost to injuries (26 per cent).
Skills and capabilities – how well-equipped the workforce is to meet the company’s future skills needs
- 52 per cent of companies acknowledged their approach to the skills and capabilities of their workforce.
- 21 per cent provided data on their contributions to investment in training and development. The report notes that this figure is surprisingly low given how much FTSE 100 companies are likely to have invested in training processes, and also stakeholder interest in economic productivity. It comments that the lack of disclosures may be due to commercial sensitivity, a lack of investor interest, or challenges generating data.
Engagement levels of the workforce – how motivated the workforce is and how fulfilled in their jobs and committed to corporate goals they are
- 42 per cent of companies provided results of an employee engagement survey, but many lacked any useful explanatory context.
- 34 per cent of companies provided meaningful commentary on ways in which they foster and measure employee engagement.
- 64 per cent of companies disclosed mechanisms for dialogue between the workforce and senior management. Only 9 per cent gave details of trade union membership and 15 per cent reported processes for whistle-blowing.
The research found that there are substantial variations in the quality of reporting of workforce-related issues. Ultimately, most reports do not comprehensively detail the composition, stability, skills and capabilities and engagement levels of their workforce effectively or explain how these themes relate to the company’s long-term strategy and purpose. The report urges companies to improve on reporting in these areas as better disclosures are helpful to investors. It also urges companies and investors to engage with recent initiatives designed to promote better reporting, including the Investment Association’s long-term reporting guidance published in May 2017 and ShareAction’s Workforce Disclosure Initiative launched in 2016.
(PLSA, Hidden talent: What do companies annual reports tell us about their workers?, 15.11.17)