Social media has improved the speed and responsiveness with which companies can interact with their constituents and consumers. But while the ability to react is a good thing, it doesn’t mean that companies can ignore long-standing rules about the information they release.
Recently, the Securities and Exchange Commission (SEC) unveiled guidelines for companies that want to release their earnings reports via tweet or Facebook post. While this option offer a strategic way to reach and involve more people in the conversation, announcements still need to hold up to SEC scrutiny.
In an interview with The Wall Street Journal, E. Terrel Gilber Jr. an attorney at Arnall Golden Gregory LLP said, “Where I think companies are prone to slip up is if they focus solely on the new ways to communicate with investors but forget the basics of disclosure, are they making material misstatements or omitting information that is misleading to investors?”
Since any contortion earnings information or company performance can result in companies facing costly securities litigation, it’s essential companies use the same disclosure assurance whether the news is being communicated through tweet or 20-page release. The problem is it’s much more difficult to get a disclaimer statement into a communication that’s only 140 characters long.
Gilbert says that one way to get around this is by always including a link to the press release with the tweet, or post. This will ensure that a full version with all the disclaimers there in is available to those making material choices based on the reports. Because the SEC rules on social media announcements, need to coincide with the submission of an 8-k, all of this information should already be available, it just needs to be made obvious to the reader.
Other issues surrounding the release of investor data on social media sites revolve around CEO and executives liking or retweeting information from other companies.
“While social media lends itself to a CEO liking that on someone else’s Facebook page or posting a link to that article on Facebook or retweeting it to their followers…officers and directors of companies need to be aware what they are retweeting when retweeting someone else’s words or article, as they may be deemed to have adopted those words,” said ?
Social media still presents problems in spaces where their needs to be a line drawn between the professional and the personal. Hopefully SEC scrutiny of the space will encourage others to take a hardline in social media policy.
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