I had the opportunity and pleasure to participate as a panelist in an online event hosted by CommPro.biz entitled, “Investor Relations Leaders Debate SEC’s Latest Ruling on Social Media for Financial Disclosure.” With me were other investor relations industry leaders including Business Wire’s Cathy Baron Tamraz, Marketwired ‘s Michael Nowlan, NASDAQ OMX’s Matt Farlie, NYSE’s Judith C. McLevey, PR Newswire’s John Viglotti, StockR, Inc.’s Vinny Jindal, and Loeb & Loeb’s Kenneth R. Florin. Based on my past several blogs, the subject is near and dear to me. There was great dialogue among the panelists – so much so that the moderator, Gene Marbach, wasn’t able to get through all of his prepared questions. To view the event, available online May 1 on CommPro.biz click here: http://www.webcaster4.com/Webcast/Page/10/1347.
As the only investor relations consultant on the panel, I contributed what I believe was a unique perspective to the discussion. As I have been saying, the SEC’s recent proclamation that social media can now be used as an acceptable means to accomplish disclosure for Reg FD purposes is a great step in the right direction. Nevertheless, I believe that the April 2 statement is only a starting point, and that the SEC needs to issue more specific guidance to help public companies figure out how to incorporate social media into their IR communications. This is undoubtedly a subject being discussed throughout IR departments and C-Suites of corporate America.
Of course, the subject of the infamous Facebook posting by Netflix CEO Reed Hasting was a focal point of our discussion, as this was what gave rise to the SEC’s statement.
The position I articulated yesterday on Netflix: great company, great financials, great reputation. However, their actions after April 2: bad. As an admired company and one that so many people look up to, Netflix had an obligation to use this opportunity to set the example on best IR/social media practices. Even though they may not have intended to be the cause for the SEC defining 21st Century IR communications, through their actions, they have de facto become the poster child.
IR Magazine Editor, Neil Stewart, who I have known for years and have the utmost of respect for (as well as for his publication), suggested during the audience Q&A session that I was being too harsh on Netflix. I want to use this blog to reiterate my response to Neil as well as my concern for what Netflix did. It is my goal in doing so not to attack the company, but rather to ensure that IROs and other IR professionals throughout the U.S. not consider what Netflix did as the right thing to do going forward. The IR industry should not consider Netflix’s actions during the past several weeks to be IR best practices.
Let’s review what really happened chronologically (and simplistically): On April 2, 2013, the SEC exonerated Netflix and stated that social media can be used in IR communications; on April 10, 2013, Netflix filed an 8-K with the SEC and in it, specified five social media channels that it “may” use for disclosing material information (in addition to its website and traditional communications vehicles); on April 22, 2013, the company filed an 8-K with its first quarter earnings – it also used its website and PRNewswire for a press release – however, the company didn’t utilize ANY of the social media channels so indicated in its April 10 filing.
My point to Neil, was not that I was being critical of Netflix as a company. But rather, as an investor relations professional who consults with many public companies and is now being asked what to do in light of the SEC’s April 2 statement, I believe it is my obligation to voice an opinion on what best practices should be. Indeed, I believe that Netflix’s April 10 8-K filing was haphazard and did not consider (i) implications with respect to the company’s future disclosures or (ii) how it would be viewed by an industry struggling to come to terms with what best practices should be.
Essentially, what Netflix did in its April 10 filing was to disclose the company’s “social media IR communications policy.” What other purpose could it possibly serve? Yes, the company qualified which communications channels it “might” use in the future to disclose material information. But does that now mean that every investor (and especially the individual investor) has to follow each of the media through which the company “might” decide to disseminate material information? This is definitely not what the SEC intended when it issued its April 2 statement.
So, what could Netflix have done differently to avoid my constructive wrath? Here is what I would have recommended had I been at the table discussing the issue: When it filed its earnings and 8-Ks on April 22, it should have done so across ALL of the media specified in its April 10 filing. The company was correct in using the traditional disclosure sources (newswire, 8-K and website) to satisfy Reg FD, but to the extent it went so far as to highlight alternative social media channels in its April 10 filing, it should have posted the earnings or mentioned them there as well.
This is where I believe the discussion on best practices with respect to the use of social media in IR communications needs to begin. Companies should begin by conducting a communications and social media analysis to determine the appropriate disclosure channels (traditional and social) that will allow for all of their investors to have easy access to material information. Once this is complete, they should determine which means of communication they will use and announce this publicly (as Netflix did in its April 10 filing). This will then become the company’s official disclosure policy. Until the company decides to modify this policy, it should ensure that all material news be disclosed 100% across all of the channels specified in the policy. Investors can then determine how they wish to access this information and everyone will be on notice of everything material going on within a company.
Doesn’t this seem simple?