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IR Execs Urge Caution on Social Media After SEC Ruling

By Brittaney Kiefer

NEW YORK: Despite the Securities and Exchange Commission's just-released guidelines embracing social media, corporate comms executives say companies should not abandon traditional methods of communicating with investors.

The SEC said Tuesday that companies could use Twitter, Facebook, and other social media channels to communicate with investors as long as they tell them up-front which outlets they will use.

The decision followed an investigation by the SEC into whether Netflix CEO Reed Hastings violated a rule when he posted on his personal Facebook page last July that the service had exceeded 1 billion hours viewed in a month. The agency said it would not pursue civil charges against Hastings, but he would have run afoul of the new ruling because he had not previously announced corporate information on his Facebook page or informed investors that he would do so using that platform. Since the Netflix situation, companies have been waiting for clarity from the SEC on the role of social media in corporate disclosures.

Many investors and analysts are still uncomfortable using social media, says Brian Schaffer, transaction services practice leader at Prosek Partners.  

Social media should be a “complement, not a replacement” for traditional disclosure platforms, he says. At large institutions where compliance departments block access to personal email, video, and sites like Facebook and Twitter, communication via social channels is “likely to fall on deaf ears,” he adds.

Bob Pearson, president at W2O Group, says social media can be a useful complement to press releases, corporate sites, 8-K forms, and earnings calls because it gives companies access to a wider audience.

 “It allows companies to have a wider reach more quickly. People are getting news from these other channels,” Pearson explains.

The SEC's relaxed stance on social media can also open opportunities for storytelling in investor relations, says Jeff Zilka, GM and EVP of financial communications and IR at Edelman.

“The best IR officers have already been using storytelling methods in partnership with corporate communications executives, but I think that is going to become mainstream and a core skill,” he says.

In 2008, the SEC issued guidance allowing companies to disclose sensitive information to investors through corporate websites, email alerts, RSS feeds, and blogs. In its latest report, the agency calls social media “an extension of these concepts,” but says that executives' personal social media sites should not automatically be assumed to be appropriate disclosure channels even if they have a large number of followers or subscribers.

Because social media posts tend to be brief, IR execs should be careful to provide context for corporate information they share on those platforms, says Lisa Rose, senior MD and head of the IR practice at Dix & Eaton.

“In the 140 characters you're given [on Twitter] to tell your news, would you be providing the full perspective, or is there a risk that people will misinterpret things?” Rose cautions.

Additionally, companies should ensure their tone and message is consistent across social and traditional channels, says ICR CEO Tom Ryan.

“It needs to be done in a way that's not overly promotional and sticks to the facts,” Ryan explains. “I would advise against something inflammatory where you put out an earnings release in a factual manner and then post something on Twitter like, ‘We blew earnings away.' That would be a hit to a company's credibility.”

According to a 2012 survey by the Conference Board and Stanford University, only 14.4% of companies communicate with shareholders via social media. However, communications leaders say that is likely to evolve, just as more companies began using their corporate sites to disclose information after the SEC deemed it appropriate in a 2008 ruling.

“Maybe someday social media will be on par with what we consider today to be traditional,” Schaffer says. “We used to do radio tours with clients, but no one today would use radio as a primary disclosure point.”