Investor relations may finally be entering the world of the blog, an Internet communications concept that began some 10 years ago. Blogs are a wonderful tool with great potential, so of course Corporate America has been late to adopt them. But finally, we’re seeing progress.
A few brave CEOs have, for several years, created their own blogs, believing this could be a means for communicating directly with employees, customers, investors, and the general public. Microsoft’s Bill Gates was in the vanguard with his own blog. Soon thereafter, Sun Microsystems CEO Jonathan Schwartz created his own blog.
Now a new trend may be taking hold, begun by Dell Inc. when it launched an investor relations blog—Dell Shares—in November 2007. Lynn Tyson, Dell’s vice president for investor relations, attempted to manage expectations saying:
“Sometimes, however, we may be quiet, as there are periods of the quarter and various topics we can’t talk about, such as forward-looking statements or non-publicly disclosed information. We hope you will understand some of the constraints and legal obligations that may from time to time, limit our commentary. Also, have a little patience with us, because some of these limitations may also slow us down as we learn and sort our way through this new field.”
She went on to say:
“We’ll post your comments and questions, which we’ll respond to, where appropriate, in a timely manner … As [company founder and CEO] Michael Dell recently noted, there are conversations going on about us all the time, and we want to be part of those conversations—to listen, to learn, and to contribute. We hope Dell Shares will be among your choices of places to come for perspective and commentary on Dell.”
On Nov.28, 2007, the Securities and Exchange Commission, in its continuing recognition of the power of the Internet for investor communications, embraced the concept of shareholder e-forums that would allow shareholders to communicate with the company and among each other on proxy- and governance-related issues. The Commission adopted rule amendments intended to remove legal concerns by exempting a company or anyone else who creates a shareholder e-forum from legal liability for what others might say. Still, most companies have shunned the e-forum concept believing that in an era of shareholder activism, the forum might become the devil’s playground.
For the most part, investor relations officers have been reluctant to adopt the blog as additional means for investor communication. Dell’s Tyson has addressed numerous investor relations audiences since launching the Dell Shares blog. IROs, she says, meet the most resistance from their general counsel or outside legal counsel. Her response on behalf of the IRO is that if your company trusts you to do your job in speaking, writing, and responding to investors, then it should trust you in using the blog.
Tyson says that few of Dell Shares blog posts are reviewed by legal counsel ahead of time, in part because the blog has a process including a defined editorial calendar and sticks to what the company will (and won’t) talk about online.
One benefit (ideally) is the perception that the company is investor friendly by using the blog to communicate with its investors’ and listen to their concerns and opinions. All public companies can benefit from being perceived as investor friendly!
Recently, General Electric’s communications team launched a new blog: GEReports.com. GE says the blog will be another means of providing investors with additional information, but is not designed to replace the traditional means of disclosure. I think there’s a distinction between Dell’s use of its blog and what GE is doing. Several observers of corporate Internet usage believe GE may be using its blog to respond to market rumors—specifically, telegraphing the statement that it is not seeking equity investments from sovereign wealth funds and will not cut its dividend during 2009.
Legal departments over the years have advised companies to avoid the temptation to respond to market rumors. The rationale is that once a company does respond, it saddles itself with a duty to update in the future, should what it says in a response to rumor change materially. Secondly, should a company deny some rumors but not respond to a particular rumor, it can send a message that it must be true.
In spite of all those concerns, however, the blogging movement marches on. For example, newspapers and columnists have created blogs to communicate with and get feedback from their readers. Conversely, there are those in the investor relations and corporate communications professions who view blogs as the “wild, wild West” and avoid them altogether, because they venture beyond the traditional and more regulated disclosure means.
Should a company want to launch a blog to communicate with investors here are some things to consider:
The blog should not be used as a substitute for news releases, Form 8-K filings, and the traditional means for communicating material information. The blog should be subject to Regulation Fair Disclosure consideration and other standards applied to traditional communication means, and should not be used as a way to disclose new material information.
An investor relations blog must be credible by communicating factual information and avoid expressing opinion on investor issues. Accountability follows lock-step with credibility here, which means the company is accountable for the accuracy of the information it communicates on the blog.
One criticism of corporate blogs is that they are often used to market the company’s products or services. The IR site should be used as a means for communicating information to investors; leave marketing to the marketing department.
A distinction may be drawn between using the IR blog for responding to specific market rumors, and addressing more widespread misperceptions in the marketplace. Without referring specifically to what misperception may be out there, the company can put out accurate information that would have the effect of countering that misunderstanding. An example might be an apparent lack of understanding in the investor community related to how the company is creating shareholder value. A reiteration on the blog of the company’s value creation proposition or strategy might effectively counter the misperception.
Of utmost importance is to view the blog not only as a means for distributing information, but as a way of listening to what your investors are saying.
With the introduction of any new concept, there are leaders and followers. Leaders test the waters and do so with forethought and attention to process. They may well make adjustments along the way, but they will ultimately pave the way for followers—who in this case will recognize the communication benefits of the blog. One benefit (ideally) is the perception that the company is investor friendly by using the blog to communicate with its investors’ and listen to their concerns and opinions. All public companies can benefit from being perceived as investor friendly!
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