By Mary Conway, Conway Communications
Last week’s ruling from the Securities and Exchange Commission about the use of social media to satisfy fair disclosure for corporate information is provoking many headlines and discussion. In light of prior rulings on corporate disclosure, it’s most likely that this new development will provoke companies and their advisors to look more carefully at how social media can be usefully incorporated into an effective communications strategy, but the impact will evolve over time, and practices will vary significantly by company and industry.
For example, the 2008 ruling from the SEC on the use of corporate web sites to satisfy disclosure requirements is still very much a work in progress. Across industries and market cap sizes, companies have been slow to move to this practice. Instead, a hybrid form, using a press release containing a headline and several paragraphs on the news and then directing readers to the company’s website for the full information, has become the most common form of such disclosure. When queried as to why more disclosure hasn’t moved to websites (by companies using only partial or no such forms), most investor relations officers identify discomfort by legal advisors as the main obstacle.
My guidance on this latest news is that it bears close watching, and continued consultation with investor relations and legal counsel. Companies need to be mindful of their shareholder bases and the level of activity that their social media communications are generating. Many investment management firms block social media (for other reasons), making it likely that a broader move by companies to more fully utilize such channels will lead to the development of better aggregators; it’s just not likely that all shareholders, professionals and retail alike, will start following every company they hold or monitor, on these sites. And the very real requirement that companies advise investors in advance which channels they will use and when holds true here as well, but it will likely evolve much the way the advisories about the use of corporate websites for disclosure have.
I expect a flurry of reports from law firms and other advisors on this issue in the coming weeks, some of which may take differing approaches to the news and guidance on its implementation.
Conway Communications is our Investor Relations partner.