Rethinking Training

Dec. 21, 2004
New reporting could lessen the penalty Wall Street imposes for investing in people.

Pressure from Wall Street to make their numbers combined with what she calls the "mistake" in accounting principles that treats investments in human capital as a cost and not an asset, produces a "perverse" outcome for public companies, says Laurie Bassi, chair of Bassi Investments Inc., Bethesda, Md. The stock markets penalize those that invest in their workers for incurring costs that lower earnings.

However, Bassi suggests, "there is a relatively simple fix for this." It is for companies to report their investments in people in their annual financial filings, their 10-Ks and annual reports to shareholders. "If we started reporting investments in training, that would make a difference because then analysts would have a new piece information," contends Bassi.

She notes that General Electric Co. currently reports its investments in employees, but "as far as we can tell they are the only Fortune 500 firm that does." Without the new reporting, competitive pressures to keep such investments under wraps and concerns that securities analysts might take companies to task for some of their investments in people make it unlikely that many other companies are going to follow, she indicates. What are the chances for widespread reporting of investments in people? "I am not terribly optimistic that we will get a public fix to this problem in the foreseeable future. I would be delighted to be wrong on that, but I don't see it happening anytime real soon," says Bassi.

9 That Invest In People

Listed alphabetically, these nine publicly traded firms have been cited by Bassi Investments Inc. for their "significant investments" in employee learning.

  • Applied Materials Inc.
  • Capital One Financial Corp.
  • Dow Chemical Co.
  • FedEx Corp.
  • General Electric Co.
  • Intel Corp.
  • KLA-Tencor Corp.
  • Lockheed Martin Corp.
  • Microsoft Corp.
Source: Bassi Investments Inc.

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