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Nick Lindsay

Elemental CoSec

Director

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Governing social media

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The social media world has transformed the way in which we view and consume news. We now look for instant information and instant updates and are far happier to click on a link than to wait for a letter to arrive in the post.

It is not simply news which is affected by this communication revolution; the way in which organisations interact with their investors has also undergone a digital change. Even the annual reports which once thudded through our letter boxes have been largely replaced by simpler letters or even emails providing links which enable online access to the information which is required in order to make well-founded investment decisions.

In an era in which the emphasis is very much on comply or explain and on providing investors not just with a snapshot but also with a measure of guidance as to the future prospects of the company, the use of social media and technology as a means of communication can only help to build meaningful dialogue. But social media interaction comes at a price and that price is the danger of misleading consumers and investors with poorly thought out commentaries.

The interaction dilemma

This leads to a dilemma. On the one hand, the move towards interactions and collaborations is driving businesses towards maintaining an active social media presence. It’s a rare business nowadays that doesn’t keep one eye at least on social media postings and actively respond to any queries, complaints or praise in a timely manner. On the other hand, unguarded comments can see businesses breaking stock exchange regulations, breaching customer confidentiality or misleading investors.

It may be a simple case of working with employees to instil a ‘think before you post’ mentality

The solution is for businesses to ensure that social media policies form part of their risk management strategies. Good corporate governance isn’t simply concerned with internal processes; it also needs to reflect the way in which organisations interact externally. So drawing up a social media policy which provides investors and consumers with the information and interaction which they expect but at the same time reflects the need for confidentiality and good practice is an important element of a strong governance regime.

The guidelines needn’t be onerous. Depending on the size of the business it may be a simple case of working with employees to instil a ‘think before you post’ mentality. On the other hand, if a high degree of customer confidentiality is required then some degree of double checking or sign off may be required. For example, it may seem innocuous for a solicitor to post ‘just off on the train to Manchester’ but if there are rumours of a potential merger in the offing and business analysts know that the firm works with a certain company then a seemingly throwaway post may finish up breaching confidentiality and stock exchange rules.

Used properly, social media and the provision of online information can considerably enhance the business/investor/consumer dialogue. The key to success, as with other governance and risk guidelines, is to build a strategy which is proportionate to the nature of the business and to work with employees to ensure that they understand and comply with that strategy.

Author Profile Picture
Nick Lindsay

Director

Read more from Nick Lindsay
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