Friday, April 24, 2009
It's clear to me that many companies are missing powerful opportunities to communicate richer information with their investors through their web sites because rules around new media are new - and I think it's a wasted opportunity. I had the opportunity to sit on a NIRI panel in New York last week to discuss new technologies and how they can help investor relations professionals (NIRI is National Investor Relations Institute) and through the questions I received during and after the panel the lack of confidence around the issue really surprised me.
The problem starts with the SEC who haven't been a big help in this area so far. The SEC first provided guidance on the electronic delivery of documents in 2000 and then gave an update August 2008 - yes an 8 year gap at a time when the technology, and investors use of technology, exploded in sophistication. But now the SEC has provided guidance and it's straightforward (you can read the Commission Guidance on the Use of Company Web Sites - it's readable).
In simple terms - provided that the company makes sure investors know that information is being published on company web pages - and that the company web site is a recognized channel of distribution - then the information is considered public for Reg-FD purposes. In fact the SEC "recognize[s] the enormous potential of the Internet to promote the goals of the federal securities laws." It's the ultimate information-level-playing-field since 99% of investors will have access to the internet.
Nowadays many company CEOs have blogs but few have been as courageous as Jonathan Schwartz of Sun Microsystems who pioneered meaningful communication with his market through his blog. Most public company CEOs err on the side of caution and their web sites are marketing brochures not disclosures, probably at the urging of their general counsels. They don't really engage the market - consider the CEO of Thomson Reuters - Tom Glocer's blog where he posts about once a month and "shy's away from subjects too close to the business of Thomson Reuters, in part to avoid 20 pages of risk factors in each post"
I understand the conservatism, but are CEOs and the IR heads missing an opportunity to engage their shareholders in meaningful discussion about the progress of the business and the decisions being made? When communications are limited to earnings calls, press releases, presentations at (closed) conferences run by the banks and private meetings the discussion is bound to be either un-nutritutious to the retail shareholder with lots of questions, or boring at best. Even with some CEOs who have tried to embrace Twitter they can turn into "flat out commercials" as Business Week posted about Ford's CEO yesterday. The best Twitter CEO user I've seen is Tony Hsieh from Zappos who puts company culture first and uses Twitter as a way to communicate with employees and customers alike - and is a comedian too.
There are ways to use new technology to help CEOs and company management engage their shareholders without breaching the many controls of the SEC. The August 2008 guidance "encourages" the use of company sponsored blogs and electronic shareholder forums - while of course making it clear that communications through these forums are subject to the same antifraud provisions of the federal securities laws.
So back to the NIRI opportunity. The train is coming down the tracks one way or another. Blogs written by product consumers (customers), industry observers and employees are growing every day - we know because we track and tag them for our customers. At a minimum the IR team needs to know what's being said about the company and what investors are seeing so they can get ahead of sentiment and respond to questions from shareholders.
But that is only the first step. The bigger opportunity is to set up well regulated, interactive, on-line communication with shareholders and greatly improve the shareholders understanding of the company strategy, culture and market. Obviously confidential subjects like M&A and deal negotiations don't belong in these forums because the discussion itself can queer the deal, but aside from critically confidential negotiations and employee confidentiality, so much about what a company is doing and why can only help understanding.
Many things drive investors views of companies - but understanding is at the heart of investor confidence. I think this is a terrific opportunity for companies to embrace the new communication mechanisms and have better investor relations, especially retail investor relations, as a result.