Companies’ diversity, equity and inclusion (DEI) efforts are front page news.  Institutional investors are vocal about the importance of diversity in a company’s workforce, particularly on its management team, as well as on the board of directors. Human capital management practices were the focus of recent disclosure requirements issued by the Securities and Exchange Commission in August 2020 (which the SEC has indicated may be enhanced in the near future). And some companies are beginning to tie executive incentive compensation to DEI or other human capital metrics.

 

In the second half of 2021, the market for talent at almost all levels of the organization was red hot, with increased levels of turnover and challenges in attracting new staff. Companies across most industries have been faced with significant employee retention challenges, putting upward pressure on compensation levels. Another new factor in 2021 was the reemergence of inflation as an economic concern, with annualized rates of inflation of 6.2% in October and 6.8% in December. If this level of inflation continues into 2022, companies may be under additional pressure to increase pay.

A new Middle Market Business Index special report from RSM US LLP states that the growing importance of environmental, social and governance (ESG) issues has reached an inflection point in the middle market, even in the face of the dramatic economic fluctuations of the last year and a half. Stakeholders’ increased focus on ESG will continue to present immense business opportunities for organizations that position themselves to adapt to these shifting priorities.