8 reasons why human capital reporting is not happening, plus 2 ways it could

Company reports don’t report people. People like you and me.
Employees. Staff. Workers. Labourers. Who we are. What we do. What we
think. What we know. What we bring – and, as Drucker famously noted,
take home at night. Human capital – a company’s greatest asset – and as
such greatest liability, as we know full well post GFC – doesn’t get so
much as a column inch between the financial tables.

Five Hundred Years of Bookkeeping: A Portrait of Luca PacioliCompanies
report three things: past financial performance; as much green
information as they can get in; and a word from the CEO.

But no people.

are many reasons why people haven’t so far got a look in. Over the next
8 weeks, I’m going to tell you my 8 reasons. All are true in their own
way. Some you might know. Some might surprise you. Others might just
make you mad. And then I’m going to give 2 – to me – viable ways it
could get around these reasons. All of these ideas will be posted on the HubCap forum
where I invite you to tell me if I’m right or wrong. If I’ve missed
some good ones, please let me know too. The more the merrier. All will
go into a longer more detailed forthcoming Accounting for People 2.0 Manifesto.

Here’s reason 1 why human capital reporting has so far failed to materialise:

1 the power of the Big Four

The Big Four accountancy firms – Deloitte, PwC, KPMG, Ernst &
Young don’t want reporting to change. They want to keep things as they
are and do accounting in the same, give or take, balance sheet and
P&L format since the Middle Ages and the Messari.
They want reporting that says or gives no context to the real people
whose voices and actions and creative music make the numbers, like notes
on a score, come alive. It’s not their forte to account for this stuff.
And it’s not in their substantial lobbying interest either: If
accounting for people usurped the pre-eminence of accounting by
numbers…well, do the math.

Accountancy regulators don’t want
to change either. Feeling lucky, they gambled on intangibles once, and
got burnt. So even though, post Lehman, they’ve been charged by the G20
to up their game (due to report back June 2011), the only game (players,
rules, language) in town is and will always be one based on math,
despite recent non mandatory guidelines asking for greater context about
the purely financial position of the company*.

Safer being the hunter than the hunted.

*See for example the recent International Accounting Standards Board (IASB)
guidelines encouraging managers to add context to published financial
information by offering a historical and prospective on the entity’s
financial position.

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