Communication World: Brave New World

Investor relations faces the realities of social media disclosure

Since the U.S. Securities and Exchange Commission's April announcement that social media may be used in investor communications, public companies have been trying to determine the best way to do so. Jeff Corbin, CEO of KCSA Strategic Communications in New York City, has been an investor relations consultant for the past 15 years to hundreds of Nasdaq- and NYSE-listed companies, and is the author of Investor Relations: The Art of Communicating Value. He spoke recently with CW Managing Editor Amanda Aiello Beck about what companies and their investor relations groups should consider as they begin to embrace social media.

CW: What are some of the major challenges posed by social media in regard to public company communications?

Jeff Corbin: Since 2 April 2013, when the SEC stated that social media may be used in investor communications, there has been a flurry of activity across investor relations offices and agencies throughout the U.S. These professionals are trying to figure out what exactly to do and how to incorporate social media into an investor relations program. However, it is important to keep in mind that the guiding principle for this entire discussion shouldn't be which social media channels to use, but rather compliance with Regulation Fair Disclosure [Reg FD]. If a company decides to use social media in its communications, it is critical that any such communication be unequivocally fair and available to everyone simultaneously. That being said, the major challenge is the development of a social media policy that dictates who can speak officially on behalf of a company and who cannot. Social media create a host of issues given the fact that individuals within an organization probably have their own personal social media usage habits, which might conflict with or possibly put into jeopardy a company's policy as to social media usage for investor relations. So a company must develop a strict policy to be followed by everyone in the company.

CW: What are the biggest mistakes organizations make when communicating investor relations material via social media?

JC: The only company so far to be called out for making a mistake in its social media communications has been [video rental and streaming service Netflix. While Netflix was eventually exonerated by the SEC, I believe the company continues to err in its use of social media. Initially, the SEC began investigating Netflix over a post the CEO, Reed Hastings, made to his public Facebook account announcing the number of hours of video subscribers had watched. The announcement resulted in a rise in Netflix stock that day. The SEC stated that the action violated Reg FD. After 2 April, when the SEC indicated that it wouldn't be investigating Netflix further and said social media could be used for public company disclosure, the company filed a Form 8-K with the SEC in which it indicated five or six social media channels that it would possibly use in disclosing material information. In my opinion, this amounted to the pronouncement of its social media policy. In doing so, it became incumbent upon the company to use each of the articulated channels when announcing material news. However, when Netflix released its first-quarter financial results-clearly material news-it did not use any of the social media channels specified. This was a significant error. When developing a social media policy and making it known publicly (which Netflix did by filing the 8-K with the SEC), a company needs to be consistent and utilize all the methods articulated. If I choose to follow Reed Hastings' personal Facebook page-which was one of the channels indicated-to learn about material news coming from Netflix, then if the news isn't there, I will not know about it and hence I am in an unequal position as compared to others who might have been paying attention to the investor page of the company's website. Organizations can prevent mistakes from occurring by establishing an investor relations social media policy and being consistent with its application across all indicated communication channels.

CW: How should a social media policy relate to the organization's ethics and values?

JC: The way in which a company expects its employees and anyone affiliated with the company to behave in the normal course of their professional lives should be the same with respect to their use of social media. To the extent that companies do not condone crude or inappropriate behavior at the workplace, one would expect that they would similarly not condone such conduct when communicating via social media. Unfortunately, in many instances this is not the case. Hence, a key point that must be included in a company's general social media policy (separate from its investor relations social media policy) is a reminder that to the extent employees draw a relationship to their professional lives within their personal social media lives, comments or communications that may conflict with the ethics and values of the organization may compromise their job status and security.

CW: What should a policy for investor relations include?

JC: Before creating a social media policy for investor relations, a company should conduct a social media audit to determine how and where their investors are engaging in social media. The audit should also include a peer/competitor social media review. Once this is concluded, then the company can create a policy that is very clear and straightforward. It should include what means of communicating (traditional and social) the company intends to use for the purposes of disclosing material news. Once it determines these methods, it should publicly announce them in a filing with the SEC (in either Form 8-K or 10-K). … When the company disseminates material news, it must be consistent in the use of all of the channels communicated in the policy. If this occurs, then the company will always be in compliance with Reg FD. If it varies from the means communicated, or doesn't utilize them at all, then questions as to violations of Reg FD may arise.

CW: What advice do you have for communicators who still need to convince corporate leaders of the value of a social media policy?

JC: Use of social media is a work in progress. Communicators may want to point out the extent to which so many companies and individuals are now embracing social media…Organizations that wish to get their messages and stories out there need to embrace social media. Having a strictly adhered-to and well-thought out social media policy should alleviate many of the concerns of those who are still trying to understand what social media means to their business and communications.

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