Luke Hildyard
As investors, pension funds need better information about the key drivers of long-term performance of the companies they invest in – and an $8trn coalition of investors say this includes detailed information about the people that work for those companies.
It is logical that organisations where the workers feel fairly treated; have access to the appropriate training; are safe and healthy in their work; and enjoy a sense of progression and purpose, with financial stability in their personal lives are likely to enjoy higher levels of productivity; better industrial relations; and lower levels of staff turnover and absenteeism.
There are a number of studies to support this theory. For example, research by London Business School found that companies with higher levels of employee satisfaction tend to achieve better stock returns over the long-term.
It is easy to think of recent examples of this effect being borne out at particular companies that have seen revenues and share prices drop after scandals relating to their working conditions and industrial relations.
For these reasons, the Pensions and Lifetime Savings Association published a stewardship toolkit in 2016, setting out a framework for reporting that pension funds should encourage investee companies to follow, based on the themes of composition, stability, skills and capabilities and engagement levels of the workforce.
We have now published a separate analysis with Lancaster University Management School, examining how FTSE 100 companies reporting of workforce-related issues compares to the standards set out in the toolkit.
The research found that, other than where reporting is mandatory (gender diversity or executive pay levels) reporting on workforce-related issues is highly varied. For example:
Just 21% provide concrete data on investment in workforce training and development or the number of workers trained. Only 9% shared details of jobs filled by internal candidates.
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% provided figures on staff turnover and just 3% provided figures disaggregated by group. These findings make the need for ongoing investor pressure on companies to improve reporting clear.
A coalition of investors (including many UK pension funds) with over $8trn worth of assets under management have committed to requesting more detailed disclosures from companies about their employment models and supply chains, as part of a Workforce Disclosure Initiative (WDI), based on the highly successful ‘Carbon Disclosure Project’ designed to improve reporting of greenhouse gas emissions.
The PLSA is supporting the WDI as part of our ongoing work in this area.
Luke Hildyard is policy lead for stewardship and corporate governance at the Pensions and Lifetime Savings Association (PLSA)
