The Use of Social Media in Corporate Communications
By: ANDREW M. NICK
September 2011
The prevalence of social media has made its usage an integral component of the customer and investor relations strategies of many companies. As companies continue to expand their social media presence, employees who engage in online communications on behalf of their employers will need to be well-versed in the securities law concerns that apply to their activities.
Information that could affect a public company’s stock price, or is otherwise important to investors, should not be discussed through social media unless it has previously been announced in a filing with the Securities and Exchange Commission. As a result, employees who participate in social media communication on behalf of the company should be familiar with the contents of the company’s filings. If an employee shares non-public information, that disclosure should be brought to the attention of a supervisor to determine whether a response is necessary.
Companies that link to or highlight third-party articles or statements may be seen to adopt such third-party statements, meaning they create the same potential liability as they would if they were made by the company. This is especially problematic if the third-party statements relate to expectations about the company’s financial performance or future prospects. Potential liability may be reduced by linking to all relevant discussions, regardless of whether the discussion is positive or negative, and by including a disclaimer that the statements are the responsibility of the third party and not endorsed by the company.
Social media also presents an opportunity to respond rapidly to speculation or bad press. However, any response should be made under the strategic direction of management to ensure that the response is accurate, does not selectively disclose non-public information, and is consistent with the company’s communication strategy.
When social media is used to comment on expectations about future developments, such comments should be accompanied by a short paragraph explaining that actual results might vary from those expectations due to known and unknown risks and potential errors in assumptions. Social media sites maintained by the company that allow third-party comments or contributions should indicate that such contributions are the responsibility of the third party and not endorsed by the company.
Employees should be aware that company policies related to confidential information and communications apply to personal social media usage, even if statements are made anonymously or to a limited audience. Employees should be careful not to appear to speak on behalf of their employers through personal social media. When relevant, employees should identify their status as employees and disclose any conflicts of interest.
Social media is an increasingly valuable tool for corporate communication. However, the informal nature of social media communications can lead to missteps that can harm a company’s reputation or result in corporate liability. Companies can minimize their risks and maximize the benefit of social media communications by implementing policies that address the use of social media and educating their employees about compliance with those policies.