Social media: not universally liked
Not all IROs are embracing
the brave new world of tweets, blogs, LinkedIn and Facebook
With Facebook’s IPO
offering an example of investor relations close to its cataclysmic
worst, perhaps it’s not surprising that some IROs think twice about
using social media in their business, especially given the
regulator-rich nature of their environment.
Understandably, and despite the persuasive tide of tweets, texts,
Instant Messenger, Facebook and LinkedIn, some investor communications
people are opting for abstinence.
One major reason is compliance. The SEC has been issuing ominous,
although necessarily vague, advisories as its staff members try to
gauge the multifarious ways would-be insider trading networks can
communicate below the radar.
For example, the commission has been wrestling with such arcane issues
as whether pressing the ‘Like’ button on Facebook could count as a
New York SEC enforcement head David Rosenfeld recently questioned the
traditional one-on-ones after earnings calls, on the basis that if a
CEO or CFO said anything in such a conversation that he did not tell
all the analysts and investors, it could be a prima facie breach of
Regulation FD. How much more risky, then, are all the channels of
communication offered by social media?
No room to relax
As compliance officer for a financial company, Barbara Riker of
Teucrium operates in an especially highly regulated environment. ‘I
don’t know how companies can let their managements tweet as if it were
an unfiltered medium,’ she says.
‘Maybe people feel that with social media the rules are relaxed, but
far from it. We’re covered not just by the SEC, but also by FINRA, the
National Futures Association and the Commodities Futures Trading
Commission. Their regulation isn’t always consistent, so a company has
to be very strict. With social media, it’s a new field that makes the
issues even more unclear, so we just don’t do it; we don’t do blogs
and if you go to our site, you can’t leave a comment.’
Her company is far from technophobic, Riker insists. ‘There is a lot
of information there – we are very transparent, but we don’t want to
get into an exchange with investors on the site or on Facebook,
LinkedIn, or similar,’ she explains.
‘Our people can have private pages, and they can say they work for us,
but they cannot post about the company and they cannot post to
personal media from the company account.’
Riker says all emails are archived for five years. ‘And we review them
all, sampling them every month,’ she adds. As anyone who has tried to
track down a personal post, text, email or tweet can testify, however,
this is a daunting task, so there is safety in a lack of variety of
media. ‘Our people don’t use Yahoo IM or even Bloomberg,’ Riker says.
This is crucial because the main thrust of the SEC’s advice is to
monitor all social media. With the glut of would-be internet
billionaires offering new social media venues, the gargantuan task of
monitoring and archiving them should give compliance officers the
mother of all media migraines, making abstinence the best solution for
But is it useful?
Additionally, there is the question of effectiveness. Social media, as
anyone who has been caught in the cross-fire of a ‘flame war’ (where
multiple users descend into a trade-off of abusive personal comments)
can testify, are not designed for nuance and subtlety. Many veteran
IROs and analysts share a strong belief in physical proximity.
‘I want to see the sweat on the CEO’s brow,’ more than one analyst has
declared. More positively, personal contact allows IROs to get
feedback on whether an investor is receiving the company’s message in
all its detail.
Andy Dolny is treasurer and vice president of investor relations at
delivery company UPS. He’s also a staunch social media refusenik.
‘Compliance is probably one of the main reasons we choose not to use
social media in IR,’ he says. ‘But it’s also a question of
professional expertise and clarity in messaging.’
He explains that if he answers a question in an email, text or tweet,
‘the messages can be misconstrued, and read in such a way that our
true intent wasn’t really understood. That’s my biggest concern. I’m
not against social media; I just don’t know that they’re the right
tools for investor relations.’
Dolny accepts that it could be right for PR or other sorts of
relations with a company, but not for IR. ‘I don’t even use email in
IR,’ he declares. ‘I’ll accept questions via email, but I won’t answer
them via email, because you could take that email and send it to
20,000 other people.
‘I’ve had more misunderstandings via email than I’ve ever had in oral
communication with people and, from an IR standpoint, I would never
want that. A lot of times it’s the way you say something, or the way
you position something in your words, so that it can be misread, or
read as guidance, or as sharing information that shouldn’t be shared.
If someone tweeted it, it’s possible it could imply something totally
different from what I’d intended.’
Indeed, how can a 140-character tweet carry the same weight as, say,
Warren Buffet’s long and informative discourses on the state of the
world and the company? His eminence and canonization by grateful
stockholders have protected Buffet from the adverse effect of what
some of his fellow CEOs might consider to be his idiosyncratic views.
No such protection was afforded Gene Morphis, former CFO of
Francesca’s Holdings, a fashion retailer in Texas. The career-crashing
possibilities of social media were all too vividly demonstrated when
the opinionated executive was ‘terminated for cause’ after someone
drew the company’s attention to Morphis’ social site postings, which
‘improperly communicated company information through social media.’
Perusal of his blog,
Morph’s View, and his twitter feed at
@theoldcfo suggests that Morphis’ sins were more a breach of
etiquette than of SEC regulations. After the earnings release, for
example, he told his Facebook followers: ‘Conference call completed.
How do you like me now, Mr Shorty?’ That was not deemed appropriate
for an officer of a company.
Nor was his tweet on March 6, just before the board meeting, which
read ‘Dinner w/Board tonite. Used to be fun. Now one must be on guard
every second.’ The next day he posted: ‘Board meeting. Good
numbers=Happy Board.’ That was five days before the earnings call on
March 12. There followed a perceptible jump in Francesca’s Holdings’
stock price, suggesting that some investors at least had internalized
his ebullient message.
By May 14, Morphis was gone but the sorry tale serves to underline the
views of Riker and Dolny, who stress the importance of training staff
and refreshing the commitment regularly. ‘We’re very clear: every
quarter they sign acknowledgments,’ Riker says.
In her company’s excursions into the virtual world, she stresses
careful examination. ‘We’ have carried out four webinars, both
prerecorded and live, and we found it an effective way to get to a
larger group of people,’ she says. ‘But we monitor carefully: all the
slides are preapproved, and before we post on our website we can
Dolny concurs. ‘It’s very important that we abide by the rules,’ he
says. ‘We log every conversation, we strictly adhere to the silent
period and, more importantly, we have a disclosure policy that our
compliance people ensure everybody reads every year – that if you’re
talking, or you’re going to be in a meeting with an investor, you must
have someone from IR there.’
Does it detract from the effectiveness of IR if such potent new
methods of communication are ignored through regulatory caution? ‘It
depends how you define effectiveness,’ Dolny responds. ‘If your goal
is to get something out to as many people as possible, that’s one
If your goal is to make sure you’re heard, that you understand the
question and therefore the answer, that the message is what you want
to deliver, then I don’t know whether social media are the right
thing. They tell us only that we delivered something; we won’t be able
to tell how it was received, because now we don’t know who received
it, or how. It’s about more than compliance.’
Copyright Cross Border Ltd. 1995–2012. All rights reserved.