Social media applications are quickly taking corporations by storm, and all who have attempted to and successfully integrated these technologies into the larger corporate communications strategy have sung their praises. Some such benefits are: the democratization of media, the creation of more intimate relationships with stakeholders, the sharing and collaboration of information, greater brand awareness, and increased transparency with all publics. However, it is the increased transparency that social media inherently brings to organizations that is giving some publics pause.
It is generally accepted, in this age of Web 2.0 technologies, that one will not enter into the online community anonymously. Rather, authenticity is expected, and sometimes demanded. For example, a corporate blogger is expected to be open and honest about their relationship to a company and to respect the online community enough to disclose all affiliations. Those who do not disclose all information, fudge or distort the information they do publish, or falsify their identity, risk an immediate and very harsh backlash from every possible side. Therefore, openness should be a goal for every industry and client type – nonprofit, corporation, association, etc. But what about trade secrets, competitive information, or financial figures?
There does need to be some discretion applied by every blogger, Twitter-user, and corporate communications strategist who wants to dive into the World Wide Web with social media guns blazing. Unwanted disclosure of sensitive information can adversely affect a company just as acutely as can a negative comment: one unintended disclosure of confidential business information over the Internet can damage a company’s business and reputation in a heartbeat. The release of “inside information” to the global public can also lead to financial crises, such as negatively affecting a company’s stock.
To combat the publication of sensitive inside information outside the company that might both damage the company and unfairly benefit certain investors, the SEC implemented the Regulation Fair Disclosure (“Reg FD”) ruling in 2000. The Internet was increasingly becoming a medium for research and up-to-date information publication, such as stock values. Further, the medium empowered individuals to do their own research and make informed decisions, and investors demanded more access. The Reg FD ruling profoundly changed how companies communicate with their investors, by instilling better transparency. It did so by mandating frequent, timely reports, and that all publicly traded companies must disclose material information to all investors at the same time. However, at the time, the SEC could not have envisioned how the Internet would take off as a platform for the global sharing of information. Recently, FINRA, the Financial Industry Regulatory Authority, issued Regulatory Notice 10-06 to guide those it regulates on the use of social media websites, specifically on blogs and social networking sites. According to the notice, several firms have asked FINRA how rules governing communication with publics apply to social media sites. The notice clarifies the responsibilities of companies to supervise social media use to ensure that publics are not misled. The FINRA notice 10-06 is an industry-wide guideline to help individual companies regulate how their internal publics, such as executives, managers, and employees, use social media.
In order to prevent any disclosures that could prove disastrous, every company or organization should create policies and procedures that make clear the discretion necessary when dealing with private information. This is not to say that transparency should be abandoned for opacity, only that guidelines should be in place that help employees know the difference between being open and over-sharing.
In the financial industry, unguarded openness could very easily turn detrimental. This industry is understandably going to be more hesitant than others when it comes to blogging, tweeting, or podcasting. The way to avoid unnecessary friction between the openness of social media and the requirements of good business, and of the law, not to be “too open,” is to be aware of existing federal regulations, establish and follow company well-thought out guidelines, and plan Web 2.0 use accordingly. Don’t be afraid to use social media – just do so consciously and conscientiously.
To learn about other, similar viewpoints on the possible risks concerning the use of social media without policies or guidelines, see these blog posts:
Social Media Risks – What You Should Know by Themelis Culper