IR in the age of social media

Oct 08, 2009

What the ‘tweet’ do we know? Twin Cities NIRI chapter ponders new communication channels

‘The risk posed by social media for your company ... exists whether you participate or not,’ observed Darrell Heaps, CEO of Q4 Web Systems, an IR website and communications firm out of Toronto. ‘If you’ve ignored social media and said there are too many risks, we‘re not going to get involved, then you are putting your company at higher risk ... than if you know how to use the tools. The market doesn't care whether or not you’re there. They’re going to use the channels that are most readily available to them to put their message out.’

Heaps made those comments during a panel discussion yesterday in downtown Minneapolis on best practices for using social media to communicate material information, co-sponsored by the Dorsey & Whitney law firm and the Twin Cities NIRI chapter.

Facebook, Twitter, YouTube and blogs, collectively referred to as ‘social media’, have worked their way into the IR conversation. As evidence of how hot the topic is, NIRI chapters as well as consultants have sponsored several events on the topic around North America over the past six months.

Embrace the trend; plan your attack; update and integrate your policies across functions; implement consciously; train your employees; monitor what’s being said about your company; and manage the process. Those were the key takeaways in Minneapolis.

‘Social media defines the online experience today,’ Heaps said. Over the last couple of years, the line between social media and mainstream websites has blurred, he observed. ‘You go to your favorite newspaper site and you see comments, profiles, people interacting. The social concept has been applied to virtually every website.’

Citing a recent study by Brunswick Group, Heaps reported that 47 percent of buy-side and sell-side players surveyed in the US and Europe were prompted to research an issue and 20 percent made an investment decision or recommendation based on information from a blog. Nearly two-thirds of the US survey group expects blogs and social media to play an increasingly important role in investment decision-making in the future.

‘Obviously they are not going to your website to read your latest press release, because press releases are ubiquitous. They are coming there looking for context, events, slides, conference call information, ... getting a better feel for your company,’ he added.

The saga of Whole Foods CEO John Mackey anonymously blogging about both his company and takeover target Wild Oats is the archetype of CEOs Gone Wild in the blogosphere. Using that example, Dorsey partner and corporate practice attorney Jon Abram counseled the audience, ‘If you’re going to blog about your company and you’re an employee, you must properly identify yourself. ... It would be ill advised to say here are the rules for everyone else then there is our CEO. That’s not an easy conversation to have, but you need bring everyone into the room.’

A cautionary tale on how important integration and process control are in the online world came from Dell recently. The company inadvertently posted its YouTube interview with CFO Brian Gladden discussing Q2 results before issuing the press release to the wire services. The video got noticed and the news spread on trading blogs and tweets, which were picked up by Bloomberg news. The stock shot up 6 percent on 23 mn shares in a 21-minute rollercoaster ride before the company was able to rush out its release.

One company that has taken the internal training issue head-on, Heaps noted, is AMD. The company puts employees through a blogging license program allowing graduates to ‘blog without getting approval, but not everyone gets’ licensed, he said.

The risks a company faces in poorly managing social media are external as well – everything from consumer boycotts on Facebook, to CEO impersonations on Twitter, to line employees discussing work issues on third-party message boards and blogs that end up as fodder for rumors and analysts’ queries.

Heaps recalled one analyst bragging about trolling HR blogs, Facebook groups – basically anywhere he could find talk about the company ‘that is not part of the official communication or disclosure. It’s his competitive edge. He finds that little bit of information that someone else hasn’t found and he can trade on it. It’s absolutely what’s happening,’ Heaps cautioned. All these trends reinforce the need to monitor what’s being said about your company, the panel agreed.

Despite the challenges, Barbara Doyle, VP of IR for Lawson Software, recognizes the necessity of using social media. ‘As a $1 bn small-cap company, we need to consider every ... viable channel to get our message out. As a technology company, ... it’s a part of our culture. And our customers, employees and investors are increasingly using these channels to get information, so it’s simply not a choice, not an option,’ to ignore social media.

Doyle ‘absolutely sees [CEO blogging] as an opportunity to lead the discussion on your industry, ... having your CEO in that spotlight in thought leadership. The issue is in managing it.’ To her, managing means ‘not just managing our own blogs but also influencing the bloggers.’ Over the last two quarters she has started to proactively reach out to bloggers she identified via a Google search to ensure that what they were saying about Lawson was accurate immediately following their earnings release.

The SEC has weighed in on the topic as well. Its 2008 interpretive release, ‘Commission guidance on the use of company websites’ (PDF), provided some clarification for IROs. In it, the SEC set out certain conditions whereby a company could use the web as a primary disclosure vehicle but also reiterated that web communication in general is covered by the antifraud provisions that companies live by with their traditional communications.

The guidelines have not caused a rush away from traditional practices. None of the panelists could name a company currently using the web as anything other than a supplement, though some users are more sophisticated than others.

Social media are ‘going to be a necessary component of everyone’s business going forward, so don’t be afraid of it. Embrace it. ... Don’t let issues get in the way of doing things that are really going to be helpful for your organizations,’ Abram concluded.

Best practice

• Identify who can post what where. Define levels of authority, approval and update or create needed corporate policies.
• Integrate social media disclosure as part of your overall corporate disclosure processes and training. Coordinate with traditional disclosure means (eg, 8-K and/or press release) in compliance with Reg FD, etc.
• Set up a cross-functional team with other non-IR content providers (eg, HR, intellectual property), which also require input over employee blogging content, and set up consistent policies company-wide.
• Provide training and apply policies consistently.
• Check with your exchange for relevant policies related to website use, etc.

Practical tips for IROs

• Set up Google keyword alerts and use search.twitter.com. Search ‘monitoring social media’ on Google for more hints on tracking what’s being said about your CEO and company.
• Consider a notice-and-access press release approach. Issue a short press release with a key facts summary, risk factors disclaimer and a link to the website that has all detailed financials.
• Limit Twitter use to sharing links back to your website where you have all the disclosure controls in place.

Sites all IROs should be familiar with:

• Seeking Alpha: an aggregator of 1,200 financial blogs.
• StockTwits.com: a Twitter-based network, which is hot among traders and now distributed by Bloomberg.
• Wikinvest: a financial portal that aggregates data feeds and creates a ‘virtual’ report on your company.
  

By Brad Allen