Human Capital Oversight at the Board Level: An In-Depth Examination Across the REIT Industry


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As investor pressure continues to build focusing on environmental, social, and governance (“ESG”) practices, as well as disclosure items surrounding such, it is critical that Boards develop an appropriate plan for oversight across these areas.  Ferguson Partners Consulting (“FPC”)  performed an in-depth examination across the public REIT industry and found that there is no one size fits all approach being used – however, one trend that has emerged is a rebranding of Compensation Committees to a broader Compensation and Human Capital Committee (or some name variation thereof) that focuses on the “S” and that of social responsibility – namely oversight of diversity, equity, and inclusion (“DEI”), employee engagement, internal pay equity, and talent management/succession.


Approximately one year ago (effective November 20, 2020), the Securities Exchange Commission (“SEC”) issued rule amendments requiring public companies to disclose “a description of the registrant’s human capital resources, including the number of persons employed by the registrant, and any human capital measures or objectives that the registrant focuses on in managing the business (such as, depending on the nature of the registrant’s business and workforce, measures or objectives that address the development, attraction and retention of personnel).”[1] The principles-based approach (1) reflects an expectation that disclosures will be tailored to a company’s own business or industry using management’s judgment and (2) allows for the disclosures to evolve in response to changes in a company’s environment.

The rules do not include a definition of “human capital” or a list of required measures to disclose.

This lack of guidance has allowed for a wide interpretation of the rule, with many companies taking a “less is more” approach and disclosing minimal details.  A PWC analysis of 2,000 Form 10-Ks filed from when the rules were enacted through February 28, 2021 found that 99% included information on employee demographics, 73% on employee lifecycle (e.g., hiring, learning/development, retention, succession planning, etc.), 62% on health and safety, 61% on total rewards, 47% on labor relations, and 32% on employee feedback/satisfaction.[2]

However, this new requirement did open the door for more detailed disclosures surrounding ESG practices, and specifically the “S” or social practices as it relates to this disclosure requirement.  It is anticipated that human capital management disclosure and demand for details will gain momentum from investors and stakeholders in the coming years. With investors looking for more substance from these human capital disclosures, it is reasonable to assume that the SEC will consider a more defined requirement in the near future.

As human capital disclosure requirements begin to expand, Directors of public companies are seeing their responsibilities increase as well. Although not specifically participating in the day-to-day operations surrounding human capital management, Directors are now being tasked with an oversight role.

Companies should consider whether ESG topics should be addressed holistically or separated across Committees; specifically for human capital management operations, whether oversight will occur across the Board as a whole, an existing Board committee, or a newly defined subcommittee.

Key Findings

FPC specifically examined public filings of 174 internally-managed constituents of the Nareit All REITs Index (as of December 31, 2020). FPC found that that the oversight of human capital management varies across the REIT industry. Of those REITs that disclose where various ESG responsibilities fall (127 companies), and as it specifically relates to human capital management oversight, nearly a quarter (23%) do so within the Compensation Committee or what is often times being rebranded as a Compensation and Human Capital Committee or some form of variation thereof.  At the same time, it should also be acknowledged that the majority of companies do not bifurcate ESG and address such in a broader manner — most commonly across Nominating and Corporate Governance Committees (50%), the full Board of Directors (17%), and to a much lesser extent, an ESG specific subcommittee (6%).

Exhibit 1 – Human Capital Management Oversight Responsibilities

Reflects only those Nareit All REITs Index constituents (as of December 31, 2020) that have disclosed where responsibilities for human capital management oversight fall; Compensation Committees and Nominating and Corporate Governance Committees with expanded names have been classified under the standard committee name; In instances where the Compensation and Nominating and Corporate Governance Committee are one combined committee we have classified them under the Nominating and Corporate Governance Committee category.

In instances where human capital management oversight responsibility falls under the Compensation Committee, REITs have begun expanding the title of their committees to better encompass their full responsibilities.  Exhibit 2 contains a variety of examples of those instances where the Compensation Committee has been rebranded (and in certain instances where the name remains the same) and a corresponding expansion of the charter to reflect responsibilities that expand beyond the traditional executive pay oversight and into the social aspect of ESG.

As investors continue to expect expanded human capital disclosures, and the SEC inevitably responds with more stringent requirements, the ultimate question becomes, what actions should your company take in order to evolve with the changing times?


Exhibit 2 – Compensation Committee Titles and  Expanded Charter Examples

Exhibit 3 – Nominating and Corporate Governance Expanded Charter Examples

Exhibit 4: Other Committee Title Examples



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For questions or further information, please contact Jeremy Banoff.

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