SEC Gets with the Social Media Times: How Will Companies React?

Posted by: in Communication Strategy, Corporate and Strategy on April 3, 2013

The Securities and Exchange Commission is finally catching up to the times. On Tuesday, the SEC issued a report giving publicly traded companies the leeway to announce market-moving news via social media channels, as long as a company clearly states the channel it will use.

The news is welcome, especially for an agency that expects transparency, but I wonder if these social media channels are still underused when it comes to communicating with shareholders and, more importantly, how investors will welcome the SEC decision.

The Wall Street Journal, reporting on the SEC’s decision, cited a 2012 survey from Stanford University that said only 14.4% of companies communicate with shareholders via social media. This comes despite the fact that over 75% of the survey respondents said they use social media to interact with customers. In this case, it seems companies, while rightfully focusing on social media to improve corporate reputation and customer loyalty and satisfaction, aren’t using it to mitigate risk and communicate fully with investors.

The reluctance to frequently use social media to share market-moving information is understandable for several reasons.

  • First and foremost, the lack of guidance from the SEC likely kept companies from communicating more easily with investors and other interested parties
  • Second, despite the ease of using channels like Twitter and Facebook, social media does have its limits. Facebook, in my mind, still exists primarily for consumer announcements and brand engagement, and Twitter’s 140 character limit doesn’t always support the easiest disclosure
  • Third, a press release is a deeply rooted part of any company’s communication repertoire, and this is unlikely to change

Still, despite the challenges of social media, in my view, the pros greatly outweigh the cons. Companies do not and should not dispense with a press release or 8-K announcement in favor of using social media exclusively. Instead, the communication should be multi-channel. Social media should provide ease and speed of access, which any stakeholder values, while a press release should provide fuller, deeper context around a significant, market-moving event. It will be interesting to see how companies take to the new SEC guidance and harness social media to more fully engage investors and all interested stakeholders.

By: Adam P. Silverstein

Adam Silverstein is an Account Director with the W2O Group.

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