Big organizations spend lots of money - approximately 36% of their revenues - on human capital, but few tell their shareholders about how those dollars are spent. According to Mercer Human Resource Consulting, when it comes to reporting on their own employees, many companies believe mum is the word.

A two year Mercer analysis of the 100 largest publicly traded US companies indicate that only about 20% discuss human capital and its contribution to business success in their annual reports. About a quarter of the companies provide only limited references to the workforce while others do not mention their people at all.

Mercer´s human capital strategy consultants Rick Guzzo and Haig Nalbantian conducted the study, reported in the winter issue of Directors & Boards. "Imagine a company spending one third of its revenue on a capital investment or an interest payment and never addressing it with shareholders in their annual report," said Mr. Guzzo. "It´s unthinkable."

Mercer also found:

• Of those companies that do report on human capital, the information typically focuses on simple payroll or wage statistics.
• About a quarter of the companies offer platitudes ("our people are our greatest asset") or a few lines about the caring nature of the organization.
• Even when employees are discussed, the annual reports usually fail to provide hard facts about how the companies´ practices for managing human capital drive business results.

While the SEC requires disclosure of top executives´ compensation, there is no regulatory requirement that companies report their human capital practices other than the number of persons employed. The sweeping disclosure reforms announced last week by the SEC are not likely to address human capital issues, according to the authors.

According to Mr. Nalbantian, it is up to CEOs and boards of directors to break the silence and report to shareholders about how they are managing the human capital side of the enterprise. "Workforce management strongly contributes to the market value of a company, directly through its impact on productivity, and indirectly through the creation of other tangible and intangible assets such as the company´s intellectual property and market brand."

The state of external human capital reporting reflects a company´s internal state, according to Mr. Guzzo, with most firms having little to say on the subject despite the availability of various metrics. "Organizations do have the capabilities - sophisticated tools and information databases - to gain insights into the workforce and how it can best be managed for business success," said Mr. Guzzo.

"The demand for human capital reporting will escalate over the next few years," he added. "Investors let companies off the hook in the past but I don´t think they´ll settle for the ´sound of silence´ much longer."

Mercer Human Resource Consulting is a global leader for HR and related financial advice and services, with more than 15,000 employees serving clients in over 190 cities and 41 countries and territories worldwide. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York, Chicago, Pacific, and London stock exchanges. For more information, visit mercerHR.com.