Jeff Higgins and Rebecca Gorman – Potential Changes to the SEC’s HCM Metric Disclosure Rules

Connect with Jeff Higgins:

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Connect with Rebecca Gorman:

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Connect with David:

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• david.turetsky@salary.com

Podcast Manager, Karissa Harris:

• HRDataLabs@salary.com

 

Production by Affogato Media

Resources:

• Draft of the SEC Recommendation
• Human Capital Management Institute (HCMI)
• Salary.com's Consulting Practice
• HR Data Labs Season 6 Episode 16
• HR Data Labs Season 6 Episode 14

• “By disclosing more [HCM metrics], you have a chance to grab the narrative to your story in a positive way.”
• “The SEC is very US-centric because it regulates US issuers, but when you have large, global companies that are US issuers, having to comply with this . . . it might look [different] compared to a competitor who is strictly US-based.”

Announcer: 0:02

Here's an experiment for you. Take passionate experts in human resource technology. Invite cross industry experts from inside and outside HR. Mix in what's happening in people analytics today. Give them the technology to connect. Hit record for their discussions into a beaker. Mix thoroughly. And voila, you get the HR Data Labs podcast, where we explore the impact of data and analytics to your business. We may get passionate and even irreverent, that count on each episode challenging and enhancing your understanding of the way people data can be used to solve real world problems. Now, here's your host, David Turetsky.

David Turetsky: 0:46

Hello, and welcome to the HR Data Labs podcast. I'm your host, David Turetsky. We always try and find people inside and outside the world of HR to bring you the latest on what's happening and what you need to pay attention to. Today, we have two phenomenal guests, two brilliant guests. First, my colleague from Salary.com Rebecca Gorman, who's a VP of compensation consulting. Hello, Rebecca.

Rebecca Gorman: 1:06

Hello, David.

David Turetsky: 1:07

How are you?

Rebecca Gorman: 1:08

I'm fine. How are you?

David Turetsky: 1:09

I'm very good. We have another special guest though, Rebecca. We have Jeff Higgins, who's the founder and CEO of HCMI. Hey, Jeff, how are you?

Jeff Higgins: 1:18

Hey, David, I'm doing great. Happy to be here.

David Turetsky: 1:20

We are happy to have you as well. So why don't you start us off and give us a little bit about your background? And what is HCMI?

Jeff Higgins: 1:28

Sure. HCMI is short for Human Capital Management Institute. And that's actually how we started out as a training and consulting organization. Today we have advanced predictive analytics software called SOLVE. But we're not here to talk that much about that today. Interestingly, my prior background, I kind of ended up in HR by accident. I grew up in accounting and finance ultimately, as a controller, VP of Finance and CFO as an initial career and then was in between jobs at one point and a publicly traded a bank holding company reached out said, Would you like to work in HR? And I said, No, of course not. But they got me to come in for an interview, and all their top management were MBAs and CPAs. And during the interview process, I said, Look, I don't know, they wanted me to run compensation on it. Okay, it's numbers, I can do that. But I don't speak HR. And they all laughed, you know, literally in different interviews and said, well, we don't speak HR either. So can you present this HR data a little bit more like financial statements in a business case, so that we can make sense of it and make better decisions. Sure, I'll give it a try. So they talked me into it, and luckily discovered my true passion in life, which is bringing numbers to people, a little bit of detective work, a little bit of accounting work, and lots of learning about HR. So that's how I ended up in HR. And again, all my finance colleagues thought I was nuts, but discovered my true passion in life and have been doing it now for more than 20 years.

David Turetsky: 2:55

Wow, that sounds very much like my origin story. But I didn't start in finance. We do love our finance colleagues. They don't necessarily love us all the time, as you know Jeff. But we love them. Rebecca, can you give a little bit of background on yourself?

Rebecca Gorman: 3:08

Yeah, so I have kind of an interesting background, landing me in the compensation space. I actually majored in French and History and went to graduate school in history, but then decided that I didn't want to be in academia. So I started doing investment and economic research, and ended up at The Hay Group doing HR research. And from there, I flowed into the consulting world. And I've worked at some firms, PricewaterhouseCoopers, Mercer and Towers. And then also, I've been on the inside running total rewards for some companies. So I've been on both sides of the fence.

David Turetsky: 3:41

That's very cool. And so both of you will bring interesting perspectives to our topic. But before we get there, Jeff, what's one fun thing that no one knows about Jeff?

Jeff Higgins: 3:53

Both of my parents were teachers. I decided early on that that was the last job I would ever do. Because I saw how they're, you know, and the public school, high school teachers. So I'm like, boy, if there's one job I'll ever do, it won't be that one. So I spent my whole life running away from that, you know, long career accounting and finance. We just talked about, you know, HR analytics and what I do, and lo and behold, I was told many times, including when I was literally in the military, I became a trainer for certain things. The military said, You're good at this teaching thing. I'm like, not, not what I wanted to hear. And lo and behold, you know, 30 plus years later, I'm an adjunct professor at USC teaching analytics. So the moral of the story is if you're good at something or it's in your future, no matter how far you run, you're going to end up there somehow.

David Turetsky: 4:41

There seems like there's a Godfather quote in there somewhere.

Jeff Higgins: 4:46

You can run but your your destiny will find you.

David Turetsky: 4:49

Right, right.

Rebecca Gorman: 4:50

That's a good thing! I guess.

David Turetsky: 4:51

No, it is.

Rebecca Gorman: 4:52

I mean, could you

David Turetsky: 4:53

It's also genetic, isn't it? I mean, that's purely genetics.

Jeff Higgins: 4:57

Apparently!

David Turetsky: 5:00

So Rebecca, how about you? What's one fun thing that no one knows about Rebecca Gorman?

Rebecca Gorman: 5:04

Oh, my goodness. Well, I don't know if nobody knows it. But I lived in, I think six states, grew up in Colorado, went to college in Louisiana, graduate school in Virginia, then lived in Maryland, also in Massachusetts, so lived a lot of places.

David Turetsky: 5:19

You are definitely a melting pot of the entirety, almost the entirety of the breadth of the US.

Rebecca Gorman: 5:27

Right.

David Turetsky: 5:28

Well, also, we could say that you speak all different timezones.

Rebecca Gorman: 5:31

Exactly. Yes, indeed, actually.

David Turetsky: 5:34

And there you are. So we're definitely going to call you whenwe're not sure what time it is.

Rebecca Gorman: 5:38

All right. Fair enough. I'll be here for you.

David Turetsky: 5:40

Thank you. So today's topic is is quite fun. And for those of us who are geeks, for executive compensation, and for disclosures, this is going to be one for you. So there are potential rule changes coming. And there are groups within the SEC, and we're going to talk about that a minute that are putting together proposed rulemaking around HCM metric disclosures. And so today's topic is potential changes to the SEC rules regarding HCM metric disclosures, and why they matter to you. So our first question, and I'm gonna put this out to Jeff and Rebecca, you can dive in there, too. What are some of the rule changes, suggestions that groups have made regarding HCM metric disclosures?

Jeff Higgins: 6:31

That's a great question. And I'll try to try to boil it down to a really short answer. Really, going back to 2017, a group of institutional investors petitioned the SEC, and said, hey, you know, CEOs, and companies are all telling us how great their talent is to Hey, our people, our most valuable assets, such a commonly used phrase by CEOs. And yet nothing has been reported. So we buy into that. But now we want more disclosure. And oh, by the way, companies increasingly in their risk section of their reporting, or their 10k 10Q's, they list all these human capital risks, we can't find people, we can't retain people, we can't, we can't pay them properly, we have other kinds of problems. Diversity has become an emerging issue and opportunity for organizations. And yet, almost nothing is disclosed publicly by the companies. They use a lot of flowery language, but there's no there's no data. And so SEC, are investors, just investors, really customers of the SEC, have been pushing for that. And so the SEC actually did something in 2020, they issued a new rule and said, Hey, we're gonna, people are material, companies, you decide, its a principles based approach, you decide what needs to be reported, not much was, and the institutional investors made some recommendations, and they're still working at it today. So interestingly, I'll pick on my former career, finance and accounting, they're never early to any party, you know, you can count on them not to be the first to the party. Right? They have finally, you know, pretty much almost a decade after this, this started, they actually petitioned to 2022 the SEC for detailed rules and breakdown on on headcount workforce and labor cost. And the reason they said it's, you know, biggest costs for most companies, and it's not disclosed, it's kind of buried and all the other numbers, and they gave a great, you know, accounting argument for that, which I think the SEC really heard well, and we think that's going to influence what they're likely to come out with soon. Not to spoil it. But, we think there's actually a the SEC has sort of, shared enough of their hands through one of the subcommittee's called the IEC investor Advisory Committee of what they're likely to put out.

David Turetsky: 8:40

Rebecca, did you want to comment on the, you know, what those might be?

Rebecca Gorman: 8:44

So I would just say that the Financial Accounting Standards Board put together a proposal that was a little bit more detailed than the 2020 rule that the SEC put in place. So asking for a little bit more detail around what should be disclosed. As Jeff said, it was you have to disclose something, but what you disclose is up to you. That's pretty much the 2020 rule. And the FASB took it a little bit further. And then the Subcommittee on the investor Advisory Committee of the SEC said, No, FASB isn't going far enough, we really need to specify what should be disclosed. And those things are what Jeff listed with an additional item. And that additional item is the actual cost, or will actually two addtional items, one of the costs breaking down, what are you spending on people? And what are you spending on the different different elements of pay. Then also, the second major bucket that they were suggesting is a narrative in the 10k. That's similar to what's in the CDNA of the proxy that talks about what is your compensation philosophy, and how does it align with your business strategy? So that's what the IAC has suggested.

David Turetsky: 9:53

Isn't that going to be a wake up call for many companies who actually don't really have a very well thought through compensation philosophy, especially one that's more modern that takes transparency into perspective. I know that's kind of a sub point here. But isn't that going to kind of challenge them a little bit?

Rebecca Gorman: 10:07

Yeah, I mean, I think all of these things together, pay transparency, pay equity, which you mentioned. So what's going on in the states in terms of legislation, that's a wake up call. This kind of requirement would be a wake up call, because you don't want to be caught flat footed with nothing to say in your disclosure. On the other hand, there's this push pull between the SEC and institutional investors wanting more disclosure, and businesses saying, hey, wait a minute, we have the right to maintain competitive advantage around our business strategy. And disclosing all of these things is giving our competitors information or inside information, that that's fundamental to how we do business and how we operate. And so we shouldn't be required by a governmental or regulatory agency to tell our competitors how we're doing this. So the tendency for businesses is to disclose as little as they have to and still meet the requirement. And the tendency for institutional investors is to demand more information.

David Turetsky: 11:00

Well, when I used to do exec comp, we used to call that obfuscation. We used to do the best we could to hide crap. And you know, especially when we're talking about what were the grants, and what year was it for? And, you know.

Rebecca Gorman: 11:13

Yes.

David Turetsky: 11:14

But so let's talk a little bit about that and talk about, so what is the rule potentially going to be? And or what would the rules look like? And then, you know, do the, do the companies really have any wiggle room in order to be able to not satisfy these?

Jeff Higgins: 11:28

Oh, I would love to jump on that. And Rebecca, I loved your comment with the perspective of companies. And by the way to be to be fair, as a former CFO, I was never looking for more disclosure work anyway, right? Who's gonna vote for more work?

Rebecca Gorman: 11:42

Absolutely. Right. Right,

Jeff Higgins: 11:43

Nobody. So I get that. But but honestly, I would have been super uncomfortable making the argument that that many of these companies have made that you've stated, which is, oh, you know, we have a right to hide this as a competitive advantage. This is this is intellectual property. This is secret sauce, we should not be required to disclose, you know, more details on our pay or pay practices or what our turnover rate is, or how many people we have by major job category or group. And that argument, I think that was a great argument, I think in like 1990. So I would say most of these companies, have they ever heard of this thing called the internet? How about glassdoor.com or LinkedIn? By the way, people could reverse engineer your org chart through LinkedIn if they really want to. So most of this information that companies think they're obfuscating, and hiding, investors and others are getting to pieces of it. And the real problem, I heard a great quote from an institutional investor who's literally in the room having an argument with a large public company. And actually, the head of comp and ben for a large publicly traded company said, Look, we're never going to do this. We don't we, you know, we don't care. We just consider this too sensitive. You know, you'll have to deal you'll have to live on what's out there. And so the institutional investor representative said, Oh, so you want us to make, you know, thumbs up or thumbs down decisions based only on Glassdoor and what we can pull off of Facebook commentary in social media, and that's what we want us to make judgments about your company and how you manage your talent? And he's like, no, no, no, that's not really what I said. So there was some immediate backtracking because honestly, I think there's more opportunity. I know companies are scared about it. But there's more opportunity of more upside than downside, because by disclosing more, you have a chance to kind of set the record straight and grab the narrative, to tell that story in a positive way. Even if you have high attrition. You can say, look, we're a training ground, we bring people in young we invest in them, we train them, and then you know, they go off and do great things elsewhere. Well, there's nothing wrong with that story at all. And by the way, you've just explained to high Right! attrition rate.

David Turetsky: 13:49

Right. And that's the business model that many companies have been in, like the consulting firms forever, and investment banks too.

Announcer: 13:57

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David Turetsky: 14:08

To get back to the point, the CFO doesn't want more work, the compensation and benefits people kind of don't understand, in this case, they may not even understand the gravity based on that question. So whose lap is this gonna fall into to be able to actually start to build these responses and to actually be the people who are kind of stepping for to be able to say, we've got this we're gonna give it to you? Is it HR? Is it finance? Is it investor relations? Who's going to do it?

Rebecca Gorman: 14:37

Well, so I can weigh in on that from being on the inside running total rewards. And Jeff can speak from a CFO perspective. But in terms of, you know, mid cap companies and larger so maybe not recently, IPOed small firms who are public, but companies who've been around the block in terms of filings. Usually you have a triumvirate and your filings. You have legal, finance and HR. And so legal leads the charge in terms of this is what we've got to get in there. And finance is gathering all the numbers related to financial analytics that aren't HR related. And then HR cobbles together or collects the data, I shouldn't say cobbles together that sounds negative, gathers the data that's required, for example, in the proxy statement. So these specific items would come from the HRIS and would come from probably total rewards with some help from HR. But, David, that's a great question, because I think that's one of the things that gives organizations pause. In that it is a huge investment of time, on HR's part, at least, to prepare these things. Like the amount of time and money that it takes to just do CEO pay ratio is significant. And so in terms of having the staffing, the know how all of that, to be able to fulfill these requirements is significant. And so it's not just as if the data is sitting around to be put into a document. It's got to be gathered, it's got to be presented in a way that makes sense. So it's a big time consuming process. And that's part of the reason there's pushback. And I'm not saying good or bad. I'm just saying, if businesses have a finite amount of resources, do they really want to spend it on disclosure? Or do they want to spend it on something more strategic in their view?

David Turetsky: 16:23

Well, they can't get around it. They're, they're gonna have to actually disclose these things, or face what Jeff was talking about, which is the wrath of their investment community, right?

Rebecca Gorman: 16:33

Well, potentially, I mean, the rule, I do note that it's the end of October, and they haven't put out the rule yet. It hasn't been finalized. Because there is a raging battle. And Jeff, maybe I'm overstating, maybe I'm characterizing it a bit more strongly. But I think there is a battle between institutional investors and what they want to see, and businesses saying, hey, wait a minute, you did this to us with CEO pay ratio. And nobody thinks CEO pay ratio is a worthwhile metric now, in hindsight. Although it's a lot blurrier or grayer on how you get to it, these metrics, I think they're pretty straightforward. But we've spent all this time and money doing CEO pay ratio every year, and everybody agrees that it's not really a very helpful metric. So are you really going to ask us to do this to invest this much this much resource in this disclosure, only to find in few years, that's not really helping? So I mean, they'll have to if it gets implemented, of course. Yes.

David Turetsky: 17:29

Right.

Jeff Higgins: 17:30

Yeah. I love that. And by the way, back to one of your earlier comments, Rebecca, I totally agree that with the term you use when HR's in the room for the triumvirate, I think Cobble is actually the perfect term. I think, and I would argue that HR is often in the room nominally at best, when I was in comp for the publicly traded organization, my advice was sought almost none, I basically provided a couple of spreadsheets and that's it. I would only get called in the room if there were any questions! And, you know,

Rebecca Gorman: 18:00

The proxy statement?

Jeff Higgins: 18:01

Yep. I mean, and of course, now, you know, now, if this was pre, this was back a while, this was pre, you know, CEO pay ratio. Which, by the way, the funny thing I was, I was totally against that, it's like, why do we lead with the stupid metric instead of the smart ones? It obviously has not done any favors, or earn any credibility for the SEC, or investors. But I, in the long run, you can't bet against investors because arguably, they own these public companies, so they are gonna get their way. It's just a matter of time. And I think the SEC, because of the 2020 rule, and the response of companies was pretty bad. Meaning all right, companies, you decide, you know, people are mostly material, you can, by the way, you can choose to say that people are not material, I don't think any public company has ever done that. Because that would be really bad. But they say you decide what the material metrics are, and you report them. And the additional disclosures have been almost nil with the exception of diversity, which was already a movement that was taking shape.

David Turetsky: 18:58

Right.

Jeff Higgins: 18:58

So companies have not stepped forward to offer up anything. And I think that's that was also a very poor move on their part, and, you know, individual and aggregate and I understand why. You coined it really well, if legal leads the party, hey, let's disclose nothing new, because anything we disclose could have risk. So let's keep risk as low as we can. Unfortunately, there's already a ton of risk you can include in your reporting and your proxies, all these stated risks in your list of risks for your disclosures, and they have all this all this boilerplate, great risks on people, and no metrics about how you're managing or mitigating any of those risks. So you can't you can't state a risk, and then absolutely hide everything about it. And I think what the SEC proposal would be, which is really just four areas turnover, headcount, labor cost, and diversity, maybe something like internal hires or promotions, is, frankly, really good, basic information that most companies have. And so I don't know that the costs will be that prohibitive. And certainly, if anything, it should put CEO pay ratio back to this place, which is a lesser metric that people shouldn't be relying on. Because this other information would give them far greater insight. And I think that's just, that's just going to be table stakes going forward, particularly when you consider you know, where all the value is created by people today. You know, 10 people in a room with good Internet can be the next unicorn billion dollar company going public. And you didn't have that, you know, when earlier SEC rules and REG SK was created, it was all manufacturing and industrial.

Rebecca Gorman: 20:34

Yeah.

David Turetsky: 20:36

Hey, are you listening to this and thinking to yourself, Man, I wish I could talk to David about this? Well, you're in luck, we have a special offer for listeners of the HR Data Labs podcast, a free half hour call with me about any of the topics we cover on the podcast, or whatever is on your mind, go to Salary.com/HRDLconsulting, to schedule your FREE 30 minute call today. So based on that, and let's just say and assume that the SEC does eventually adopt these suggestions. What can companies do now to actually prepare? Like you say, you know, maybe it's some specific metrics, but what can they do to prepare to get ready for that?

Jeff Higgins: 21:17

Well, I'm happy to take a quick cut at that. Because it's, by the way, the end of the day, and it does list in the, in the IEC recommendation, a fifth item, which I would argue is actually the most important, and you already touched on it, Rebecca, which is the narrative. And that's where that's where compensation can really play a role. But I would say no DILLY, no do it like last year, you can't use the same statements. Because if you're going to disclose all this, it means there's going to be they're going to be more numbers to hold the organization accountable. And some of the flowery language they use, may have to be cut back, or it's gonna have to be consistent with the data that gets reported. And what companies can do specifically one besides tracking, you know, making sure you're track and report all this stuff already. So you build your story, because having the numbers is only half the battle, the other half of the story. That's going to be the piece that takes a little time, what is what's happened, what's actually happening here? And how can we craft a, you know, a reasonable, and hopefully positive story out of it, or, Hey, it's just not going well, but we're working on it, right? Because I don't think anyone is going to just all of a sudden, say dump dump the company stock because they're not doing particularly well in one metric or another. It's really just a starting point, in fact, that you might almost say it's a pass your first year, it's get the information out there. And if it's bad, then next year, you think you can easily you know, low hanging fruit, you can improve it, you can look great the next year, or the next, you know, a few quarters down the road. And lastly, I'd say if you're looking for a way to reduce risk, I'm going to bring in another piece of compliance out there, which is if you want to reduce risk, don't make up your own metrics, and don't get super creative, because I think that is, you know, that's exactly what legal doesn't want to see happen, is getting creative with these kinds of metrics. And I don't think the SEC is going to give you everything you need to do this, they're gonna say, here's what you need to report, but they're not going to, they're not going to write a book and issue it, which would be, I guess, ideal or terrible, depending on your perspective. So there's another there's another regulatory tool out there, that was created by the ISO, the International Organization for Standards called ISO 30414. It's a document that can be purchased for about 125 bucks, because ISO's a nonprofit, and it's how to measure and report workforce internally and externally. And it's got 60 Odd metrics in there. So if you're looking for a great tool, and it will reduce risk, because if you say we're following this ISO set of rules and guidelines, that way, nobody's going to come back and say you got you know, you played fast and loose with any of your metrics or your definitions of terms, because you could reference that.

David Turetsky: 23:56

They already have metrics that are built into their HCM. So if they're usually if they're going to the ISO standards, well hopefully they're, they're actually the same standard and their same calculation is in the HCM. But that would kind of be a little bit more reengineering, and probably cost a lot of money to do. Wouldn't you suggest that they start with the tools that are at their fingertips and not have to reinvent the wheel?

Jeff Higgins: 24:20

Absolutely. But I think we're giving a lot of credit to the HCMs if we assume that they have any of these kinds of metrics ready to come off. In fact, my big complaint when I was in HR, when I got when I crossed finance to HR, I had a, an eye opening awakening. Which is I said, Hey, where's kind of the guidebook on HR for you know, how we measure report to workforce and they said, Oh, here's the employee handbook. And I'm like, no, no, I don't want to know how many days off I get or what the benefits policy is. How do we how you know, how is all this stuff measured and reported? What are the what's the standard, and they said, Oh, we don't have anything like that. So there really hasn't been anything and this ISO standard is only five years old. Most companies don't know about it or use it. And I would argue most of the HCM providers would just say, Oh, well, we have 150 custom reports you can run, but none of them are actually going to give you ISO compliant metrics or really do a fair job of what the SEC is likely to recommend. It's, it's based on ad hoc type things over the years. And of course, every company, you know, can, 10 reasonable companies could probably come up with 10 different ways to measure turnover.

David Turetsky: 25:24

Yeah, I would be very worried about those metrics and the ability for us to make sure that the story is straight with finance. So the data from your HRMS needs to be in complete sync with the finance systems as well as supply chain systems. So that when you're seeing something on one page, the investors don't look at the other page and go wait a minute, you said your total spend on talent is this, but your finance people just put a table over here that's not the same.

Jeff Higgins: 25:52

Oh, yeah.

Rebecca Gorman: 25:53

And David, you've just presented the big elephant in the room, that is a huge issue for particularly large issuers. So for, so in my perspective, my point of view is that SEC is very US centric, because it regulates US issuers. And so when they put together rules, it focuses on organizations almost as if they are pure, strictly US companies. But when you have large global companies that are US issuers having to comply with this, and they've got 1000s of employees, and maybe most of their employees are overseas.

David Turetsky: 26:30

That's right.

Rebecca Gorman: 26:30

And, of course, I'm being US centric by saying that. But if you've got 20,000 employees in India, and 500 in the US, but you're a US issuer, and you're reporting your metrics, and you're reporting numbers for your rewards, it's gonna look weird compared to an organization that's maybe in your competitor of yours that's strictly US based!

David Turetsky: 26:49

That's correct.

Rebecca Gorman: 26:49

So, you know, are we including the 13th month for countries that have a 13 month? Are we including the fact that the government provides health care in some countries and not others? So all of these statistics and metrics that they're looking for, is very discreet and clear, perhaps to a US based company. But just like with CEO pay ratio gets really confusing when you're talking about companies that are that are global.

David Turetsky: 27:13

Yeah. And I think, Jeff, you mentioned this before, and I think, Rebecca, you may have as well, that starting out, and the reason why we're talking about this now is we're trying to say where should you start? And how do you prepare? Starting out, you need to have assumptions laid out very clearly, you know, where, what are we talking about here? Are we talking about the US? Are we talking global? You know, what is this in relationship to? And getting back to what Jeff said about the narrative, making sure the narrative plays, and making sure the narrative holds together when you read the rest of the report!

Rebecca Gorman: 27:41

Yeah.

David Turetsky: 27:41

That has not been our core competency.

Rebecca Gorman: 27:43

And with the narrative, you know, your compensation philosophy is likely to be different in different, might be demographically based or otherwise. And then one of the things that I just you know, is food for thought that maybe Jeff would have an answer to, is that we think of a lot of the HR reporting and compensation reporting as being in the CDNA as part of the proxy statement of the DEF14A, these these metrics will be reported in the 10k, which is an audited filing. And so my question for Jeff would be, is this piece, would this piece have to go to the outside auditor and be audited? In which case, that's an entirely another ballgame? Or is it something that's unaudited?

Jeff Higgins: 28:25

Oh, great question. I think eventually it will be auditable. But if if there were an area where But and if they have the data to Rebecca's point before, if organizations could punt a little bit to maybe buy themselves more time, it would probably be there. I know that the you know, some of the rule proposal outlines do recommend putting it in the 10k. But a lot of companies today are issuing a people report, an ESG report an integrated report. And so I you're thinking globally. I mean, we have a lot of companies think companies could make a very good argument that, hey, we're gonna put this information not in a 10k. And, and by the way, you know, sidestep the auditing, you know, for a while, that are using third party labor to put their stuff together we're gonna put this in our ESG or Integrated Reporting, because that's aligned with the other kinds of, you know, similar information that we're already reporting, and make, you know, make a reasonable argument for that. I also think that you're you're absolutely absolutely right about some of the risks. Another one I want to bring up, which I think is going to be the scary, in fact from what I've heard talking to companies, two things I've always heard, Jeff we'll worry about this when it happens. So most companies absolutely are either blissfully unaware or or intentionally being unaware about it. So they're not, not a lot of prep going on. And two, what I've heard is the greatest fear metric based on the proposal by the SEC is no longer turnover. It used to be turnover because it's a failure metric, right? It's hard to look good if you're when you're losing people, you know, everybody loves working for us. Well then why to 33% of your staff turnover every year? So, but there are there ways to to manage that. The one that scaring I think organizations today is contingent labor. So can you imagine how, how are you going to explain in your narrative that you're, you know, this is a strategically valuable exercise that you're doing that 50% of your workforce is contingent. a-la-Apple, how do they fit in? Right, that's and that's a TBD. I don't know that the SEC is going to even get to that that will be a big question that will come up.

Rebecca Gorman: 30:36

Well, I think, I think, and this is just a hunch, Jeff, but I think that it's, you don't want to be exposed for relying on contingent labor alone, but also, given the rules that came along with the ACA with the Affordable Care Act and the requirements of offering benefits to contingent laborers after they've worked a certain number of hours for your organization. But you know, many organizations are going to be like, Yeah, we know, we really should have made them actual FTE at some point, but we didn't. And that basically exposes them possibly, legally, that you really shouldn't. If 50% of your workforce is contingent labor, unless you're doing things like farming, where you're harvesting, and it's a seasonal, or retail, maybe, then it looks strange that half of your workforce is not benefits eligible.

David Turetsky: 31:23

Well, but then then that goes back to the story. Right? And, you know, are is that accounted for in the story?

Rebecca Gorman: 31:30

Right.

David Turetsky: 31:30

Or could it be? And I think what we're gonna have to do, because this is an amazing conversation, and I know a lot of people are just very excited now about this. I think we're gonna have to do is come back when we get closer to or we have the regulation, the rules, and see what they actually turned out to be. And then talk about, well, now what do we do? Because we can prepare, now we can start thinking about it, we can probably start looking at, to Jeff's point, the ISO standards, or we can look at what the what do we have at our disposal that we could go with, and who's going to do it and get prepared there. But then when the rules come, and they're solidified, that's when the rubber is gonna have to meet the road. So my suggestion is, I'm going to invite you to back later on, when we have more of a better understanding for what this rule looks like.

Rebecca Gorman: 32:21

I'd love it.

Jeff Higgins: 32:22

That sounds great. And by the way, David, my my prediction is they're going to issue the rules before the end of this calendar year.

David Turetsky: 32:29

That have to go into effect January 1?

Jeff Higgins: 32:32

Well, notthere's gonna have to be a comment period.

Rebecca Gorman: 32:35

In response to that. Yeah, comment period. There you go.

Jeff Higgins: 32:37

Right. So they could it would be a push, but they could have them effective for 2023, full year reporting, Q2 type, you know, or they could they could offer give people a pass and offer have it phase in for 2025 or 2024 reporting, something like that. But yeah, great comment. We'll we'll have to, and just what companies all want to hear. We'll worry about it when it happens. But that'll be hair on fire.

David Turetsky: 33:03

Yeah, exactly. Well, we've seen that happen, too, when SK came out. And then there was a relative yawn on that. But this is going to be hopefully, more impactful, less biting, but more impactful.

Rebecca Gorman: 33:15

Yeah, my recommendation is to get your data in order to get make sure you have a solid HRIS that your data is clean across systems. Because it's tough to report when you don't know who's on first, or what's where.

David Turetsky: 33:29

I don't know, third base. Thank you very much, both of you. It's been a pleasure having you on. And as I said, we're going to have you back once we know what the rule looks like.

Rebecca Gorman: 33:46

Excellent. I enjoyed it. Thanks, guys.

Jeff Higgins: 33:48

Thank you, David.

David Turetsky: 33:49

Thank you all take care and stay safe.

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