Board Oversight of Human Capital

Human capital is recognized as an indispensable and dynamic linchpin driving organizational growth and success. A focus on human capital is not new for directors. Boards have traditionally focused on the CEO and executive team, specifically on succession planning and compensation for these roles, governing the impact of effective leadership to drive organizational value. However, consideration of employees and employee matters below the C-suite was often left to management, siloed in a functional department, and rarely elevated to the board’s agenda.

Boards have increased their level of engagement in response to major events that have impacted the workforce (like the #MeToo movement, the COVID-19 pandemic, corporate scandals, and M&A), but after the event has stabilized or passed have often reverted to their traditional, narrow posture. But this approach is changing, as boards recognize that the link between human capital and the company’s broader strategy and financial performance demands more thorough—and consistent—oversight from the board.