Corporate Governance

Shearman & Sterling LLP The Management and Disclosure of Human Capital Resources Requires a Roadmap | 8 In addition to reviewing human capital resource disclosures, a review of SEC staff comments to those disclosures is insightful. It is important to understand that the SEC staff is commenting on human capital resource disclosures it views as deficient. Thus far, comments have largely come in circumstances where registration statements have provided no or very minimal human capital resource management disclosure. However, the SEC staff has also asked companies to expand human capital resource management disclosure in registration statements, in particular where the disclosure appeared to be responsive only to the prior rule under Regulation S-K to disclose the number of employees of the issuer (i.e., the disclosure focused almost exclusively on the total number of employees, geographic breakdown of employees, or whether employees were members of a union). These SEC staff comments included a specific Examples of SEC Staff Comments reference to the requirement to disclose, in addition to human capital resources, human capital measures or objectives the issuer focuses on in managing the business. Companies should be reminded of this language from the new human capital resource management disclosure rule — the new rule is intended to get not just the who, but also the why, of human capital resource management. We expect these comments are only the starting point, and that the SEC staff will expand its review and comment on human capital resource management disclosures in annual reports, as well as comment both in registration statements and annual reports on matters beyond simple compliance, such as requesting that companies provide specific programmatic or data-driven support for statements that are considered to be too general or unsubstantiated. Draft disclosures should be reviewed carefully to determine that they address the totality of the disclosure rule. Examples of Changes Made in Issuer's Revised Filing Following SEC Staff Comment Please amend your disclosure to provide a more detailed discussion of your human capital resources, including any human capital measures or objectives upon which you focus in managing your business. For example, describe any measures or objectives that address the development, attraction and retention of personnel. Please amend your disclosure to describe any human capital measures or objectives you focus on in managing your business, if material. Please revise to provide a description of your human capital resources, if material, as required by Item 101(c)(2)(ii) of Regulation S-K. Disclose the number of contractors and consultants that you employ. We note the disclosure in this section that currently none of your employees are covered by collective bargaining agreements or represented by labor unions. Please reconcile with the disclosure in the risk factor on page 54 that you currently have employees represented by unions. Adding "Human Capital Resources" to section title. We note that although seemingly a minor change, this signals an intentional responsiveness to the new disclosure rule. We recommend companies ensure that the title of the relevant section no longer go under its former heading of "Employees" but be amended to include terminology signaling new human capital resource management disclosure. Adding the language "Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and prospective employees." 1 2 3 4 1 2

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