Whether you love it, loathe it or simply fail to get it, the Australian Stock Exchange says social media is something you can no longer ignore.
Working closely with the Australian Securities and Investment Commission, the ASX recently updated its guidance on disclosure, advising companies to monitor online for sensitive information to ensure that the market trades fully informed. Further, company secretaries must consider its impacts with respect to risk.
It’s not hard to understand what’s driving the decision.
To set the context, globally eight new people come online each second using predominantly mobile or social networks, and the value of these online exchanges is adding up, both with respect to volume and impact.
Social media has become an integral part of everyday life according to Media Bistro, who found that every day:
- Almost 500 million people log onto Facebook
- 4 billion views are made on YouTube
- 175 million tweets are sent on Twitter
- Nearly 3.3 billion searches are done on Google
- And, despite the existing 4.8 billion mobile users, more mobile phones are sold than babies are born
While the statistics are mind-boggling, companies have been slow to translate them into a direct business impact.
It’s a lay down misère that companies must be where their customers are and there is increasing awareness that peer-to-peer recommendations on these platforms carry weight.
As a result, the concessions we’ve seen around social media use have been largely in the marketing and sales space.
But this approach fails to recognise that the impacts of a channel that is ubiquitous cannot be managed in or by silos, but must be wholly integrated into corporate strategy, including governance and risk.
Online information is unbounded; the speed at which it travels leads to direct market impacts (the executive and board domain).
For example, in January this year, the share price of Whitehaven Coal dropped 6% after a fake press release lit up the online networks.
The release claimed to be from ANZ overturning a recent loan to Whitehaven that would have had a significant impact on its Maules Creek project.
Both Whitehaven and ANZ later confirmed the hoax, but not before $314 million was wiped off the share price and the company was placed in a trading halt.
While market rumours are nothing new, social media means information (true or false) can reach people – shareholders, the media, regulators – faster than a company can respond.
- Would you know if there was an online issue that could impact your share price?
- Do you have a strategy for responding?
- Do you own the digital assets (website, Twitter feed, Facebook page and so forth) that would allow you to counter misinformation where it’s happening: online?
Lest you think Whitehaven was a standalone case, in Australia last year, trading ofMacmahon Holdings was halted when hoax emails prompted takeover speculation, and retailer David Jones was also the subject of a false takeover bid.
And with digital growth expected to increase at around 10% a year in G-20 nations according to BCG, these incidents are likely to increase, not decrease.
But direct attacks on companies are not the only thing causing market jitters.
Earlier this year in the US, stocks plunged temporarily when an announcement about a bomb at the Whitehouse was made via the Associated Press (@AP) Twitter account, which had been hacked.
Action by Twitter (which suspended the account) and AP meant the issue was managed quickly.
But reports suggest over $20 billion worth of stock changed hands during the brief trading hiccup.
The event reinforces the importance of having a strategy that can be activated quickly to minimise damage and restore market confidence.
In some instances, social media is little more than an extension of existing practices. Businesses regularly engage with journalists, and with six out of seven financial journalists now using Twitter for work, according to FTI Consulting, this means straddling new and existing platforms.
But in others, with the speed of technology outpacing law, the tail is at times wagging the dog.
Last year, for example, Netflix announced it had exceeded a billion hours to its 250,000 Facebook subscribers, which the Securities and Exchange Commission (the US equivalent of ASIC) interpreted as a violation of Regulation Fair Disclosure.
Netflix argued the announcement was very public, given its following included shareholders, bloggers and journalists.
Although there were other factors in the case (the information had already been widely shared and was not relevant to the share price) the event triggered hot debate on what legitimate conversation looks like in the social era.
In April, the SEC announced that social media could be used to communicate company information provided investors were told first.
The decision bridges existing and emerging practice, and acknowledges that social media is a legitimate and ongoing channel, without letting companies off the hook with respect to existing obligations. (For those who still think it’s faddish, remember that LinkedIn is 10 years old and Facebook almost nine.)
There will need to be future conversations about the way in which hyper-connectivity shapes communication in the finance sector more broadly.
But precisely what Australian companies need to monitor remains unclear.
And although the devil may be in the detail, senior social media lawyer Leanne O’Donnell says the guidance strikes the right balance and should not be prescriptive.
Similarly, she believes Australia’s corporate watchdog the ACCC is taking the right approach by making businesses aware of legal issues that impact marketing.
Then there are also the practicalities of how to keep tabs on the 1.2 zettabytes (1.3 trillion gigabytes) of data in the digital universe. Many companies already monitor the media and numerous existing and new players to this market offer a social media component. And while this may look like an opportunity, Australian director of Media Tenor Wadim Schreiner warns that these opportunities are not without risks.
“While at a first glance the new ASX regulations seem like a good business opportunity, there are risks involved for both the listed companies themselves and those assisting them to identify relevant coverage.
“No single service provider can claim to be able to completely find all individual mentions of each firm, and even less define a commonly accepted and agreed methodology around influence and relevance.
“Having said that, this clearly underlines a global trend that many listed companies around the world continue to ignore: that social media and engaging with communities are increasingly no longer just about understanding consumer needs but a relevant space that not just reflects public sentiment, but to what extent an organisation still has a social licence to operate.”
The ASX has been clear that it does not expect companies to monitor every single comment, only for market-sensitive information, material transactions, and market speculation.
And even though identifying where such information may arise or how it might play out is not cut and dried, no crisis is. To this extent, an adaptable and flexible management strategy should overcome any inadequacies on the listening side of the equation. Essentially this extends, rather than overhauls, existing good business practice.
Importantly it elevates social media from its fringe status into one that demands leadership strategy at the highest level, vital if Australia is to remain competitive and productive in a hyper-connected age where the internet economy is set to double by 2016.
This article first appeared in Leading Company.