Guest comment: Company success relies on motivated and productive employees

Evidence is growing that the long-term success of a company depends on stable, motivated and productive employees feel financially secure, professionally fulfilled, and appropriately skilled to carry out the responsibilities of their job.

Perhaps that sounds obvious, but while other material strategic issues are frequently discussed by companies and investors, the workforce as a source of value and risk has been relatively under-explored.

To highlight the issue, the PLSA has been undertaking work since 2015 to help investors ask for better information from companies to understand how well they train, motivate and develop their workers.

UK pension funds are shareholders of many FTSE 100 companies so it’s vital they understand how well the companies they invest in treat their workforce, as productive workers mean better business performance – which ultimately impacts the value of scheme members’ savings.

Four years ago we published our "Where is the Workforce in Corporate Reporting" report. This was followed with our workforce ‘toolkit’ for investors, before working with Lancaster University Management School in 2017 to produce our “Hidden Talent” research which assessed how well companies report on their employment models and practices.

We’ve now just launched an updated Hidden Talent report – commissioning the High Pay Centre to undertake the analysis – to gauge whether FTSE 100 companies have improved their reporting on these issues. This is particularly important given the level of policy and regulatory activity recently aimed at improving corporate accountability on human capital issues such as gender pay or ethnicity pay reporting, and CEO-to-workforce pay ratios.

The findings were telling.

Despite significant policymaker interest in fair pay, just over half (51 per cent) of companies disclosed the gender pay gap at the level of the board and managerial staff whereas 52 per cent disclosed the gender pay gap among all staff and subsidiaries.

In recent years, there has also been growing recognition that mental health is just as important as physical. Yet this is not reflected in company reports, with only 3 per cent of companies referring to mental health issues – though this is an improvement upon the zero who did so last year.

There was some good news. We found that 61 per cent of companies gave meaningful overall commentary on the composition of their workforce, providing context and linking to the company’s broader strategy and performance.

Although there have been some improvements there is still a way to go. A company which cares about its workforce produces better outcomes for investors, workers and their own bottom lines. It’s vital that pension fund investors in these companies continue to push for better information on these areas.

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