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The impact of social media on investor relations

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netmultiHow has social media affected the communications world with respect to investor relations?

Disclosure and necessary tools

Have a look at a graphic representing tweets launched into the communications stratosphere. Visualize the potential impact of social technologies.

Can investor relations (IR) exist today without taking advantage of what digital has to offer?

Recently, the Securities and Exchange Commission (SEC) in the U.S. has decided that social media is a necessary tool when it comes to disclosing key information. Companies can use social media, but they need to tell investors where they can find key information about operations.

As we begin to use these tools more, as a generation grows up used to them, and they evolve, the impact of social media becomes increasingly apparent:

Social media, like any nascent technology, will have its successes and failures, but criticism sometimes misses the evolution in communication:
Speed.

Social tools are quickly establishing their relevance. Studies continue to show and to project the impact on business of transformative collaborative tools. And now the SEC has acknowledged that they hold relevance for investor relations.

(Two interesting visualizations of tweets.)

“Perfectly suitable” but not if access is restricted

Critics of the SEC were calling the regulatory body a dinosaur struggling to keep up with changes in the playbook of communications. George Canellos, acting director of enforcement at the SEC, said regarding the policy change: “Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don’t know that’s where they need to turn to get the latest news …”

Of course, there are different kinds of investors, and not all investors have the same access to information. Organizations like FAIR Canada are working hard with multiple stakeholders, including regulatory bodies, to advocate for and help assure a level playing field for all investors.

The stakeholder is the message

Companies need to share information with stakeholders. Stakeholders are increasingly flexible, technologically-savvy, and as anyone who’s done research on digital technologies or social media can tell you, they want information the way they want it, when they want it, and, often, as fast as possible.

The stakeholder is the message. And the future is about listening and interacting. But is this true of stakeholders in all their incarnations? Will less social-savvy investors be at a disadvantage?

Most large companies are already actively listening to social chatter. How will the smaller investor cope?

Listening to the voice of the multiverse

Listening, monitoring messages in the digital multiverse is, and will become, increasingly important. It’s social media’s incredible speed and accessibility that makes it an important channel of information on a company or issue. You only need to focus on Royal Bank’s recent experience with outsourcing, and the resulting firestorm, to see that this is true.

Monitoring for issues related to IR is crucial.

Multiportal conversation

One of the cornerstones of communications is that an organization deserves to tell its story, but now that communications has tools like social media, it’s important to remember that public relations is a conversation. It is dialogue.

  • Conversation is now multiportal
  • Conversation resembles multiple “worlds”:
  1. Information is accumulated, digested and shared very quickly
  • Information can be accessed by almost any individual or organization in near real-time, and then sent out to more new “worlds”, where:
  1. The process might repeat again and again, exponentially

If you’re not part of a two-way conversation, then, what does this say about your organization?

Questions, questions, questions

Can less social media-savvy investors cope? Do they want to cope in this environment?

Then again, did storytellers want to cope with the printing press?

How does social affect reputation or risk mitigation for companies? Do stakeholders perceive you as having the ability to respond in a crisis? To listen? What does it say about your thought leadership? About advancing your organization, and advancing its most important resource, its people, within your sector?

You can find social media users amongst investors, both institutional and retail, customers, and analysts, but how level is the playing field when it comes to those who are less social-savvy?

The conversation over social disclosure is going on whether companies or other stakeholders take part or not. Not only is it multiportal — it’s multidirectional.

At the time of writing, a case of tweet-hacking set the whole conversation on its ear. The Associated Press (AP) was hacked, a fake tweet was sent out saying there had been explosions at the White House resulting in $136 billion evaporating from the stock market although the market bounced back after the tweet was discovered to be a fraud.

Speed is both advantage and disadvantage when it comes to social. The AP event guarantees an ongoing discussion on the use of social media and reinforces regulators’ philosophy of using social technologies as part of the integrated flow of communications.

The AP Twitter hacking will draw increasing attention to issues of security. But Bring Your Own Device (BYOD) and news wire services, as well as emails, can, and have been hacked, too.

It’s clear we’ve entered into a brave new world of digital communications where the speed of our technologies will accelerate the speed of the debate on our technologies.

Inherit the feedback

Social channels provide an interesting arena for obtaining feedback. Some feel it’s the best feedback money can buy: direct customer feedback from specific and broad stakeholder groups. And it’s cost-effective. 

In the Royal Bank case, information about what was happening was posted via social media. But the creators of the Facebook page weren’t random individuals, or even disgruntled customers. They were employees, part of a key stakeholder group.

Information is power. But increasingly, information is becoming an exponent of conversations. Debate is a necessary tool. It’s how we advance.

Yet the lightning strike of the AP event, and its resulting effect on the markets, can’t be ignored.

Justin Fox, in a recent Harvard post, said: “… history, data-crunching, and informed opinion — (it’s) intended to be consumed and debated by an audience … far beyond (insert your academic [or other] stakeholders here) …”

Restricting communication, access to information and people networks is something I doubt you would champion as a sound business practice for the 21st century … You can resist, but your competitors and customers are moving ahead.

— Mike Langford

Investor relations might not be able to shrink from social channels even if it wanted to. Some critics will say IR should embrace social channels. It’s true that adding social media to an IR website opens new avenues for disclosure and transparency. While it’s important to have contingency plans for crises and miscommunication or poor communication, that’s true of all channels in public relations.

Social conversations and what it is to be “informed”

Shrinking away from social conversations, from the debate about what’s right regarding the future, on any issue, from dialoguing about what it is to be “informed” and how to actively listen in an increasingly digital world, might lessen the ability to formulate a sound strategy for the future. Today, it’s hard to imagine that social media won’t be involved in the future of IR.

The debate is sure to be an interesting one, and like the technology itself might be ever-evolving.

Companies worry about litigation, media flare-ups and reputational damage. But shrinking away from social lessens your ability to compete as a thought leader. Thought leadership is the evolution of conversations.

Thought leadership helps set the agenda for debate for future practice. If you’re not part of the debate, then it’s hard to claim leadership.

Has anyone ever really created a sound strategy for the future by avoiding societal debates? By avoiding internal organizational opinions?

While companies worry about disgruntled employees or consumers doing damage to corporate reputations through social media, the Royal Bank situation proved that anyone can set up a Facebook page presenting their “voice”. This isn’t new. Websites have existed for awhile.

The only thing that’s changed is the medium for the message. And the speed media can be set up at.

One thing social definitely can do is empower individuals by giving them platforms that are fast and accessible, platforms they may not have had previously, platforms with reach.

What about the advantages social media may have for IR? Best practices suggest there should be a social media policy in place at every organization to clarify things.

Many organizations are leveraging the collaborative advantages of social to learn what they already know. Organizations are enabling themselves to share information more broadly within their structures.

Because what you know may not be what I know, even though we work a cubicle away from one another.

Fear of technology, and its impact on stakeholders

Is an organization that’s shrinking away from the newest and fastest channels of communication an organization that’s going to look like it has something to fear? Fear of a social planet: What does that say to your stakeholders?

Engagement, sales, customer service, feedback — the processes that social media impacts are many. None of this is static, the processes are evolving. It’s important to remember this.

The direction an organization takes regarding social disclosure says a lot about the confidence the organization has in itself, in its people, and ultimately, in its business model.

How forward-thinking do organizations embracing social media look compared to their peers who aren’t using social tools?

It’s normal that such a disruptive process gathers attention. Critics serve a valuable function in helping to refine the steps that are creating our future. Critics focus on transparency and more level playing fields.

“An integral part of the distribution platform”

Business Wire chairwoman and CEO, Cathy Baron Tamraz, recently said:

Protecting our clients’ sensitive information is at the core of what we do, and we’ll continue to do that in the most secure and innovative way possible … Social media can be a valuable part of the investor relations ecosystem, but it should not be the core. Social media has been an integral part of our distribution platform for many years … However, we are wary of unintended consequences by limiting access to a single site that doesn’t have the security, reliability, or interface to reliably serve the entire investment community.

Best practices do indeed mean you should use all the communications channels you can flow responsibly.

Social disclosure is at a very interesting point in its brief history. How will regulatory bodies in Canada respond in light of the SEC’s decision especially with respect to future policy?

By its very nature, social media can create tremendous conversation and debate. Through its incredible speed and accessibility, it can help put ideas forward on its use with respect to disclosure. In effect, social technologies can help promote or criticize social media as tools of disclosure.

The Ontario Securities Commission (OSC) provided the following as the current best practice approach:

  • If management of a reporting issuer becomes aware of a material change or a material fact, they should disclose it in a news release (through a widely circulated news or wire service) before posting the information on the issuer’s Twitter account, Facebook page or website
  • In any social media post, include a link to the news release or other disclosure document containing the detailed disclosure
  • Reporting issuers should establish policies on the use of Facebook, Twitter and other social media (see the guidance on corporate disclosure policies, quiet periods, electronic communications and rumours in sections 6.2, 6.9, 6.11, 6.12 and 6.13 of National Policy 51-201)
  • The issuer’s policies should address what disclosure can be made in a Facebook or Twitter post and who is authorized to make those posts and what pre-clearance they need.

 You can find OSC policy on what is “generally disclosed” here.

What do you think regarding the current and future impact of social media on IR?

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Written by johnrondina

April 25, 2013 at 7:00 pm

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