High Performance Boards, 2nd Edition

CHAPTER 29Human Capital Evolution for Boards

Human capital management is increasingly recognised as a key strategic lever for company performance, value creation, and stakeholder engagement. There is a growing expectation that as ‘assets’, a company's employees need to be managed like a firm's physical and capital assets. According to the Human Capital Management Coalition, a group of over 36 institutional investors representing over US$9 trillion in assets, skilful management of human capital is associated with better corporate performance, including better risk mitigation. Given its essential role in long-term value creation, it is considered material to evaluating a company's prospects.¹

HCM relates to how a company manages the risks and opportunities related to its people.² It refers to how companies can deliver long-term value to people along dimensions of performance, safety, engagement, culture, diversity, equity and inclusion (DEI), compensation, retention, gender pay equity, among others.³ Once the exclusive domain of Human Resources, HCM is now top of mind in many boardrooms. Much of this chapter is indebted to the insights and the work of Cathi Raffaeli, board member of Abrdn, one of the exceptionally talented board members that has inspired this book content.

Board Responsibility for Human Capital

The board responsibility when it comes to HCM is linked to both its strategic and oversight roles. First, the board must understand where the strategy intersects with ...