Author Description

A company's value has become increasingly tied to the capabilities of its workers rather than its physical assets. Human capital--the knowledge, skills, experience, and social and intellectual capabilities that each worker possesses--plays a crucial role in driving productivity and innovation for firms. Human capital also provides a key pathway for frontline workers--typically low-wage hourly workers at the bottom of the career ladder--to achieve upward job mobility and economic security. Although most human capital formation occurs through formal education, many people continue to hone skills and develop specialized capabilities in the workforce. Using information disclosed in annual filings to the U.S. Securities and Exchange Commission (SEC), the authors of this report explore how large retail companies invest in the human capital of their frontline workers. The authors' investigation was enhanced by a recent SEC mandate requiring publicly traded companies to disclose human capital management practices in their annual Form 10-K filings. To analyze these filings, the authors employ recent advancements in large language models that enable researchers to efficiently and accurately query and analyze large amounts of text. Using this new method of data collection, the authors explore (1) how the SEC mandate shaped human capital disclosures in retail companies' annual filings, (2) what these disclosures say about companies' investments in the human capital of their frontline workers, (3) which companies' disclosures indicate the highest (and lowest) commitments to retaining and advancing frontline workers, and (4) whether human capital disclosures have a discernible impact on stock prices.