HUMAN CAPITAL AS AN ASSET: PAGE 10 AN ACCOUNTING FRAMEWORK FOR THE NEW WORLD OF WORK HUMAN CAPITAL METRICS - THE CURRENT STATE OF PLAY Perhaps the technology sector alone is somewhat better positioned to meet the challenges of COVID-19 due in large part to its well-established policies for remote working and the 12 rising demand for digital collaboration tools and technology to support remote working . Would companies have behaved differently, and would job losses have been lower, with better human capital accounting? It seems likely. It is significant that in the EU, with sufficient incentives in place, companies have typically preferred to hold on to their employees. But such government-backed employment protection schemes risk market distortion; if sustained, they will hamper the reallocation and reskilling of labour from sectors that are likely to continue to struggle to sectors with better long-term prospects as the economic recovery progresses. They hamper financial incentives for companies to recalibrate for the new reality. And finally, they are also expensive for the taxpayer. It would be preferable if the correct incentives were incorporated directly into companies’ own decision-making through improved human capital accounting. Companies would then better appreciate the value of their workforce and would be less inclined to cyclically “hire and fire”. Indeed, many companies are already implementing their own measures to hold on to people, including furloughs as an alternative to redundancies. Based on a review by Willis Towers Watson in May 2020 of 230 companies globally that announced a furloughing of employees, most (~85%) did not set a defined time period for the furlough and a majority stated that furloughed employees would return to work as soon as conditions permit. Approximately 15% specified a furlough duration, typically from one to three months. Furloughs also create financial difficulties for employees, of course, as well as emotional distress; however, a number of companies are aiming to reduce the impact of furloughs by shortening workweeks or requiring employees to take 13 a certain number of unpaid days within a specified time period . Based on a review of publicly available announcements, 474 companies reported pay cuts as of 8 May 2020, up from 392 as of 29 April. Out of these, specific reductions were implemented for 463 chief executive officers, 417 chief executive officer direct 14 reports, 325 senior managers and 125 among the broad employee population . Such C-suite-focused pay cuts are significant as they show a principled approach to workforce management in which the value of the entire workforce is appreciated and senior executives share the burden of pay cuts in order to protect the broader workforce.