After the CEO of the world’s largest institutional investor BlackRock's announcement at the start of the year, revealing plans for an unprecedented shift in focus towards human capital management (HCM), investor relations (IR) were faced with questions regarding the associated challenges and changes. hkp.com spoke to Kay Bommer, Director of DIRK – the German Investor Relations Association.
Mr. Bommer, how has BlackRock CEO Larry Fink’s announcement indicating plans to place greater emphasis on HCM in future investment decisions been received on the IR scene?
Kay Bommer: The reception has been varied. The majority of IR heads have taken note with mild interest. Reactions have included moaning and groaning about whether anything will actually come of this new latest craze and confused looks about yet another new abbreviation. The term HCM is yet to catch on in the IR community at large. It will take more than a Larry Fink letter, above all time and an explanation of the specifics.
But we know from experience that investor pressure can be quick to take effect…
Kay Bommer: Indeed it can. That is why it is important that IR heads do not give in to any false sense of hope. Much like issues related to the environment and other aspects from the ESG cosmos, ignoring HCM is not an option. It won't be long before IR departments see themselves confronted with demands and inquiries from their investors on the matters in question.
If HCM hasn’t yet caught on the IR community, can you explain what you understand by HCM?
Kay Bommer: Institutional investors know that sustainable companies have more success in the long term. Now they are increasing their focus on HR-specific key figures for risk reasons. HCM or human capital management incorporates all aspects of HR management, from succession planning, pay and diversity right through to employee associations, occupational health and safety, etc…
The range of topics you’ve outlined here suggests this is anything but a minor issue.
Kay Bommer: There are also a range of areas where it overlaps with other ESG areas such as, for example, supply chain management or governance.
What specific steps should IR take given this increased focus on HCM?
Kay Bommer: First thing’s first: don’t stick your head in the sand, be proactive! Ultimately this is reflective of the ever-changing nature of investor dialog. While the last few years have seen increased supervisory board chair and sustainability manager involvement in this process, we’re now seeing HR join the ranks too. Not only should IR keep an eye on these processes, it should actively manage these too.
So out of challenge comes come opportunity…
Kay Bommer: Working with the HR department will enable IR to reorganize severely fragmented HCM reporting in management, sustainability and HR reports, wrest power from lawyers and auditors, and to integrate and organize information in such a way that the relevant reporting is not only legally-compliant, but also worth reading – for investors, other stakeholders, and not least the company’s own employees.
So will we see supervisory board chairs referring directly to HR departments for HCM issues in future, and not IR?
Kay Bommer: If IR departments aren’t able to add any value when it comes to specific questions and processes, it is conceivable that this could happen. But it’s worth remembering that nobody understands the language of investors better than IR divisions! Company decision-makers would be negligent if they didn’t make use of existing IR structures and expertise.
But IR departments must open themselves up to this.
Kay Bommer: Yes, of course. We can learn a lot from relations between IR and sustainability departments here. They may not always be on the same page. Achieving useful results requires openness and mutual understanding. A lot has changed on this front over the last few years and the willingness of colleagues to learn from one another is gradually increasing. Added to this is the fact that IR managers have always had to source their information from a variety of different areas. In this respect I am confident that time will see interaction between HR and IR departments prove advantageous.
Mr. Bommer, thanks for taking the time to talk to us.