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(Reported on Jun 16)

[Nikkei QUICK News] Corporate disclosure is about to change. Quarterly reports are expected to be consolidated into a single earnings report, and disclosure of the wage gap between men and women is expected to become mandatory. The demand to disclose non-financial information, such as the amount invested in human resources, is increasing, and this will provide investors with more information that they can refer to.

"It's good to see the duplication decreasing," says Shingo Ide of the NLI Research Institute.?In May, the Financial Services Agency's Financial System Council included in its draft report a policy to consolidate companies' quarterly earnings disclosures into a single earnings report. The objective is to reduce the burden on companies. The details of the disclosure and other details will be worked out from now on, with the aim of amending the law in the ordinary Diet session of 2023.

The duplication of work will be simplified, but the content of disclosure other than financial information will increase. The government's recently compiled "Basic Policy on Economic and Fiscal Management and Reform 2022 (‘Basic Policy’)" requires large corporations to disclose wage gaps between men and women. While it has the effect of encouraging the elimination of the wage gap between men and women, some also believe that "the wage gap between men and women is a very important indicator of a company's actual utilization of human resources" (member who participated in the Council).

In addition, this summer, the government will require companies to disclose management information related to investments in human resources. The aim is to enable investors to judge whether companies are investing appropriately in their employees, viewing them not as a cost but as "human capital" that will enhance future corporate value. The Cabinet Secretariat will establish guidelines for disclosure.

Disclosure in the human resources field is spreading, especially in developed countries. In the U.S., the Securities and Exchange Commission (SEC) mandated "human capital disclosure" for listed companies in 2020.

Mr. Ide believes that "investors are interested in information that may affect a company’s financial statements and other public disclosures in a few years." Regarding human capital, he requests "disclosure not only of how much has been invested, but also of what has happened to the productivity of the company as a whole as a result of the investment."

Non-financial information is not limited to the human resources field. Investors are increasingly emphasizing ESG (Environmental, Social, and Corporate Governance) as well as becoming interested in the strength of their relationships with business partners and their supply chains. This could be a step toward a cycle in which investor interest encourages companies to disclose information, the disclosure of information leads to new investments, which in turn leads to more companies becoming more willing to disclose information.

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