The Pensions and Lifetime Savings Association (PLSA) working with Lancaster University Management School has today launched a major new report – Hidden Talent: What do companies’ annual reports tell us about their workers? The report looks at the FTSE-100’s corporate reporting practices focusing on employment models and working practices - highlighting the substantial variations in the quality of reporting and lack of clarity.
The vast majority (90%) of schemes agree that composition, stability, skills and engagement levels of the workforce are important to a company’s long-term performance. Therefore, as long-term investors with £1.9tn worth of assets under management, UK pension schemes – which represent 57% of all institutional investments in the UK – are acutely interested in how companies they invest in perform against these criteria1.
Despite this the research concluded that companies vary widely in their willingness to disclose information about their workforces – often only going as far as legally required to. Specifically:
- Nearly all companies talk about the importance of their workforce but only 43% of companies report how employees added value to company strategy. In contrast, 91% discussed the workforce in relation to risk management;
- Just under half (49%) provided forward-looking commentary on their workforce such as commitments to enhanced engagement or training while 51% focus solely on past performance;
- While annual reports often serve as an opportunity for a company to highlight their achievements, almost two thirds (61%) reported on workforce issues in a balanced, self-critical fashion that was not systematically focused on the positive;
Workforce Composition, Pay and Stability:
- With the ‘gig’ economy in the headlines and an increasing reliance on temporary or self-employed workers it is surprising that just 4% of companies provide a breakdown of workforce by full-time and part-time workers. In addition, only 7% provide data or policies on their use of agency workers;
- Only 18% of companies provided any figures on staff turnover – a clear indication of a company’s stability - and just 3% provided figures disaggregated by group;
- Only 7% provide the pay ratio between the CEO and the average worker – a statistic that the Government recently announced it plans to make a legal requirement.
- Most companies provided information on gender diversity: at board level (100%), management level (99%) and for their overall workforce (99%). However, only 15% provided details of the ethnic diversity of their workforce.
Skills and capabilities:
- Just 21% provide concrete data in relation to investment in training and development of their workforce or the number of workers trained.
- Less than one in ten (9%) shared details of internal hire rates – the number of jobs that are filled by internal candidates.
- Only 34% of companies provided a meaningful narrative discussion on the ways in which they foster and measure employee engagement in their annual report. In addition, only 65% provided figures on sickness absence rates;
- 64% disclose mechanisms for dialogue between the workforce and senior management but only 9% reference trade union coverage.
Luke Hildyard, Policy Lead for Stewardship and Corporate Governance at the Pensions and Lifetime Savings Association, said:
“A company’s workforce is a key part of its strategy and business model, but meaningful information about workers in annual reports is still too rare.
“Given the public interest in issues like precarious working and economic productivity, and the government’s proposed corporate governance reforms giving workers and other stakeholders more say in reporting, our findings suggest an urgent need for better disclosure about employment models and working practices.
“We encourage both companies and investors to engage with initiatives designed to promote better reporting leading to better outcomes for companies, investors and workers alike.
Commenting on the Report’s findings, Diandra Soobiah, Head of Responsible Investment at NEST said:
“A well-trained and motivated workforce helps the companies we invest in achieve success and reach their potential. It’s important for us to have high quality information from investee companies so we can effectively engage with them about their workforce and working practices to achieve good outcomes for our members.”
The Universities Superannuation Scheme (USS) also commented on the report, saying:
“USS considers it important for investors to understand the employment models and working practices in operation within investee companies. Workforce related issues can have significant implications for company performance and cause material damage to reputation. We welcome the contribution the PLSA has made with this report in highlighting improvements that need to be made in corporate disclosure.”
Michael Marshall, Responsible Investment Officer from West Midlands Pension Fund, commented:
“As a long-term investor, it’s important that we get access to information about how companies are meeting future skills needs, ensuring good industrial relations and motivating their workers. Therefore, we welcome the PLSA’s work promoting better reporting of how companies’ working practices relate to their long-term.”
1. The Investment Association – Asset Management in the UK 2016 – 2017, pg. 48
NOTES TO EDITORS:
The PLSA commissioned Lancaster University Management School to conduct analysis of FTSE 100 companies’ annual reports to find out what companies say about the people who work for them. The most recent annual report (as of June 1 2017) were used to undertake the analysis. 98 FTSE companies were included in reporting as two were ineligible for the study. A full methodology is available in the Hidden Talents report”. The proportion of pension funds who consider these factors important (90%) is derived from a survey of under 100 PLSA fund members who took part in an online survey in Q1 2016. The value of pension fund investment is sourced from the Investment Association – Annual Survey 2016/2017.
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