CEOs not using social media today may need to in the future after a landmark ruling from the SEC last week. The face of IR is changing and the ruling may accelerate a process that’s already been underway. So what has the SEC done? It’s decided that companies can make market sensitive announcements on Twitter and Facebook.
The SEC was spurred into its deliberations by online movies on demand company Netflix. CEO Reed Hastings had shared information with investors about the company’s growth prospects on Facebook. This led to a clamor for reform that the SEC has now responded to. Last week, it announced that far from stamping out this practice, it believed that using Twitter and Facebook could be seen in a positive light.
“We do not wish to inhibit the content, form or forum of any such disclosure, and we are mindful of placing additional compliance burdens on issuers. In fact, we encourage companies to seek out new forms of communication to better connect with shareholders.”
Under the SEC’s Fair Disclosure Rules, companies will have to inform shareholders through their website that they intend to use social media to provide information. The SEC’s concern is that shareholders who are using Twitter should not get an unfair advantage over those who are not. So companies need to direct everybody to relevant announcements on social media.
This is a major step forward in the increased use of social media for internal communications and investor relations – as well as sales and marketing. Already, commentators are expecting the majority of investors in the future to access information this way as opposed to a press release or SEC filing. One effect of this will be an increased engagement by CEOs with social media as it becomes a primary channel for reaching out to global investors. Social media demands a face behind the message and the face that matters most is the CEO.
Hootsuite blogged: “As investors make the transition to social media as a primary source of business information, putting a chief executive as the face behind this information is an easy way to reassure investors that the information is accurate and important.” Very shortly after the SEC ruling, Bloomberg announced that Twitter feeds would be fully integrated into its service for the first time.