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Corporate Disclosures Needs to Include LGBTQ Human Capital Management Data to Promote Financial Inclusion and Tap into Additional Marketplace Alpha

NEW YORK, NEW YORK / AGILITYPR.NEWS / September 15, 2020 /

Democratic presidential candidate Joe Biden has pledged to make publicly traded companies disclose their environmental, social and governance (ESG) data which includes climate risks and emissions levels, a move experts say could help companies, investors and regulators make better-informed decisions and promote socially progressive companies. ESG includes human capital metrics which looks closely at corporate diversity, equity and inclusion related to its board, executive management and employees to promote financial inclusion and economic opportunity.


Biden could quickly make this move to mandate corporate ESG disclosure by having Wall Street's top regulator, the U.S. Securities and Exchange Commission, to make ESG disclosure mandatory for the public companies it oversees. The SEC is an independent agency with five Commissioners who are appointed by the U.S. president with the advice and consent of the Senate.


The US SEC can work closely with the International Organization of Securities Commissions (IOSCO) - which the US SEC is a member and utilize a global corporate ESG reporting framework that can be used in the United States but also worldwide and utilize by the global capital markets to promote accountability and transparency. IOSCO is in the process of creating a global reporting ESG framework that can be used by US SEC and other securities regulators supported by the UN and the sustainability investment marketplace representing more than $30 trillion investment.


Right now there are federal mandates FOR FINANCIAL DISCLOSURES that support a reporting framework that has existed for almost 100 years utilized by the US SEC and IOSCO -- why not for ESG Corporate disclosures? But currently corporate disclosures do not exist for HUMAN CAPITAL DISCLOSURE to support financial inclusion to end systemic economic racism. But this can quickly change with a Presidential appointment of a new SEC Chair and Commissioners.


Why should corporate disclosures also included human capital management data?


The sustained growth of the U.S. economy culminated in an estimated $14.8 trillion of buying power nationally in 2018, an increase of 100 percent since 2000 and 30 percent since 2010, with the biggest percentage gains occurring in minority markets," according to a recent study from the University of Georgia - "Multicultural Economy Report." The capital markets/ corporates need to be better connected to the growing minority marketplace through human capital management disclosures. Investors want to know who is on the board and who is in senior management positions? Investors believe more diverse and inclusion companies can increase financial inclusion and also help end systemic economic racism and discrimination.


Recently the California legislature approved AB 979 that would require NYSE-and Nasdaq-listed corporations incorporated in California as well as foreign corporations (such as Delaware corporations) headquartered in California to have at the close of calendar year 2021 at least one director from an underrepresented community on their board of directors. This new proposed law expands board representation and by default possible senior management to include underrepresented communities as people who self-identify as African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian or Alaska Native and LGBTQ (gay, lesbian, bisexual or transgender) and link companies to the fastest growing economic sectors in America. If signed by the Governor Newsom- this law will become the nation's first that recognizes the need to also include LGBTQ on corporate boards and senior executive positions from a diversity, equity and inclusion perspective. More than 600 publicly held companies with California headquarters would be required to have at least one person of color serving on their corporate boards by the end of 2021.


Why Corporate Human Capital Management Disclosures Makes Good Business Sense:


According to a recent study by the McKinsey Global Institute (MGI), employee diversity is associated with better business results. In the study, titled “Diversity Matters”, 366 public companies were surveyed from different countries in the Western World. Two key findings:


  • Gender-diverse companies are more likely to perform 15% better
  • Ethnically-diverse companies are more likely to perform 35% better

Although being diverse doesn’t directly translate to more sales or profit, companies who have a diverse population tend to be more successful. Here are some other statistics for you to consider:

  • Earnings before interest and taxes (EBIT) increased by 8% for every 10% increase in the ethnic and gender composition of senior executive teams in the United States
  • In the United Kingdom, companies have seen a 3.5% increase in EBIT for every 10% increase in gender diversity in the same senior executive team.


But unfortunately very little is being said about LGBTQ in diversity, equity or inclusion/ Environmental, Social or Governance (ESG) discussions of critical minority communities that need to be included in corporate human. capital disclosures. It's also unfortunate that current leadership in ESG efforts are not taking a more active role in this process to include LGBTQ. Today, of the Fortune 500 there are only four open LGBTQ CEOs (less than 1%) and five African-American CEOs - less than 1%.


LGBTQ Business owners and its relationship to diversity, equity & inclusion and why corporate disclosures should include this human capital metric:


There are an estimated 1.4 million American LGBTQ business owners in the USA. LGBTQ input to the economy is over $1.7 trillion. That would make LGBTQ Americans the 10th largest economy in the world. For a little perspective, that’s bigger than the economies of Australia, Canada, and South Korea combined. 


More than 75 percent of LGBTQ adults and their friends, family, and relatives say they would switch to brands that are known to be LGBTQ friendly. In 2017 alone, the LGBTQ consumer buying power was over $917 billion. 

ADVOCATE MAGAZINE: The LGBT ECONOMY IS AMERICA’S FUTURE


Doesn't it makes business sense that LGBTQ should be also included in Corporate ESG Disclosures efforts with other important diverse groups in the United States are linked to diversity, equity and inclusion efforts?


In addition to LGBTQ - other minorities need to be included in non-financial corporate disclosures (ESG) to support financial inclusion from the capital markets.


Women Business Owners Becoming Mainstream in American and their economic and political power continues to grow and why women need to be included in corporate human capital disclosures to promote better diversity and inclusion:


As of January 2017, there are an estimated 11.6 million (11,615,600) women-owned businesses in the United States that employ nearly 9 million (8,985,200) people and generate more than $1.7 trillion ($1,663,991,700,000) in revenues. Over the past 20 years (1997–2017), the number of women-owned businesses has grown 114% compared to the overall national growth rate of 44% for all businesses. Women-owned businesses now account for 39% of all U.S. firms, employ 8% of the total private sector workforce and contribute 4.2% of total business revenues.


The combination of women-owned businesses and firms equally-owned by men and women account for 47% of all businesses. 

THE 2017 STATE OF WOMEN-OWNED BUSINESSES REPORT Commissioned by American Express


Hispanic Business Owners and its connection to diversity, equity and inclusion and why it needs to be included in corporate company disclosures:


The $1.5 trillion Hispanic market is the second-fastest growing minority market in the U.S., rising by 212 percent, or $500 billion, since 2000, according to the University of Georgia study.

https://www.bizjournals.com/atlanta/news/2019/03/21/buying-power-of-asian-americans-and-hispanics.html


The $1.5 trillion Hispanic market is the largest ethnic market in the U.S., and includes more than one out of every six Americans. It is the second-fastest growing minority market in the U.S., rising by 212 percent, or $500 billion, since 2000. Mexican Americans comprise the largest of the Hispanic subgroups, accounting for $881 billion in buying power or 57.2 percent of the Hispanic total. Puerto Ricans are second-largest group in terms of buying power, commanding $158 billion or 10.3 percent of the Hispanic market. Central Americans are the third largest, with a $137 billion market share or 8.9 percent of the total. South Americans rank fourth, with 8.7 percent ($135 billion) of the U.S. Hispanic market, and Cuban Americans are fifth, accounting for $83 billion.


African-American Business Owners and its connection to diversity, equity and inclusion and why it needs to be included in corporate company disclosures:


African American buying power has seen impressive gains since the end of the last economic downturn, jumping from $961 billion in 2010 to an estimated $1.3 trillion in 2018. Since 2000, the African American market has seen a 114 percent increase in buying power.


The boost is the result of a surge in African American-owned businesses, increased educational attainment and booming population growth. The percentage of African Americans who completed college continues to rise (23 percent in 2017, up from 17 percent in 2000), and the population is growing at 22.7 percent since 2000, faster than the national average of 16.3 percent. The youthfulness of the African American population skews the group’s buying power downward, as a larger share of the population have yet to hit their peak earning years.


Asian-American Business Owners and its connection to diversity, equity and inclusion and why it needs to be included in corporate company disclosures:


A record 20 million Asian Americans trace their roots to more than 20 countries in East and Southeast Asia and the Indian subcontinent. Asian Americans have an estimated 6.2 percent of the total U.S. buying power, roughly $1 trillion. Asian Americans' buying power has increased 267 percent since 2000, making the Asian American market the fastest-growing minority market in the United States.


California led all states in the number of minority-owned firms with approximately 228,148 (22.9 percent of the U.S. total of minority-owned firms) and the New York-Newark-Jersey City, NY-NJ-PA metropolitan area led the 50 most populous metropolitan statistical areas in the number of minority-owned firms (approximately 127,736 or 12.8 percent”), said Kimberly Moore, chief of the Economy-Wide Statistics Division.


More than one-quarter (14) of the 50 most populous metropolitan statistical areas had approximately 15,000 or more minority-owned employer businesses. About one-third of employer firms (34.6 percent) in the accommodation and food services sector were minority-owned.

Source: US CENSUS


World Trends and Corporate Human Capital Management Disclosures :


What about other parts of the world allowing the capital markets to be more inclusive and corporate disclosures also include human capital management?


There are different models in different parts of the world where the capital markets has been called by government to create financial inclusion to prevent civil war over economic marginalization. Could a similar corporate disclosure model be created quickly in the US to promote greater financial inclusion to prevent or end systemic racism/ economic marginalization?


South Africa and the KING REPORT ON CORPORATE GOVERNANCE are good examples of how government, corporations, regulators and the accounting and auditing profession have come together to make quick proactive change. Corporations in South Africa today disclosing not only financial information but also human capital data to promote financial inclusion. It's not perfect - but it's an effort to promote economic prosperity to prevent civil war over apartheid using the capital markets as an engine of

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