The focus of the paper is how online communication tools, in particular social media, are influencing the communication practices of corporate IR departments at public companies of all sizes. It also examines the question of why corporate IR departments have been slower to adopt social media communications tools than their marketing and corporate communications counterparts.

Dave currently splits his time between teaching public relations in the Department of Journalism and Mass Communication at Abilene Christian University in Texas and works as Director of Investor Relations and Corporate Communications for First Financial Bankshares, Inc. (Nasdaq:FFIN).

While I highly recommend that you take the time to view the presentation in its entirety (below), I have summarized some of the key findings.

LETTING OTHERS TAKE THE LEAD

The use of social networks by public companies has increased, although many companies are still sitting on the sidelines watching to see what evolves. The following stats indicate that the realm of investor relations has been slow in the adoption of social media:

• A study by Barnes and Mattson, confirmed that 57% of all large charities use blogs, compared with 41% for colleges and universities and only 16% for Fortune 500 corporations.
• The same study also found only 28% of the corporate blogs linked to Twitter accounts, 21% linked to corporate videos and only 10% linked to podcasts.
• An informal survey conducted by Bulldog Reporter’s IR Alert of 270 IROs and CFO’s, found that only 12.5% of respondents use social media to disseminate financial information to shareholders and the financial markets.
• Further, large companies (as defined in Bulldog’s study as those with $500 million or more of annual sales) fared even worse, with only 3% using social media as part of their IR communications.

The reluctance of IR departments to pursue social media is surprising given the evidence that institutional investors and analysts are using social media tools for both business and personal reasons:

• A survey of 455 analysts and institutional investors in July by the Brunswick Group found that 42% read blogs and that 20% stated they had used the information on a blog to make an investment decision or recommendation.
• The Brunswick study also found that 58% of its respondents believe social media will become increasingly important in helping them make investment decisions.

Institutional investors and analysts are already using corporate websites to seek out company information. A study by Rivel Research Group supports this, reporting that 75% of institutional investors look for information on corporate websites “weekly if not daily”.

Evidence is growing that institutional investors and analysts, already accustomed to searching corporate websites for information, are now turning to social media. For example, sites such as Seeking Alpha, the largest financial blog aggregator, has hundreds of blogs by ex-analysts, professional investors and fund managers.

LEGAL AND REGULATORY CONCERNS

While some IRO’s are sitting on the sidelines because they don’t yet see the value of social media, the primary holdback to adoption is both legal and regulatory issues.

The SEC has sent mixed messages since they issued their “Commission Guidance on the Use of Company Web Sites” in August 2008. On the one hand, the report praised the Internet for allowing companies to make information available to investors “quickly and in a cost-effective manner”. On the other hand, the same report cautioned that the antifraud provisions of federal securities laws apply to blogs and to electronic shareholder forums in the same way they do to traditional forms of corporate communication.

However, while the SEC may not have given the definitive green light to using social media for IR, some feel they are showing tolerance and they recognize that companies are still trying to figure out whether these newer forms of online communications fit into their broader communications strategy.

There is a general consensus within the IR field that social media is a supplement to existing disclosures and won’t replace news releases, SEC filings or conference calls in the near future, if ever. In a recent webinar hosted by Business Wire, Carol Stubblefield, a securities and corporate law specialist with Baker and McKenzie reinforced the aforementioned by stating “You should do social media on top of what you are already doing, not as a replacement”. She then emphasized the importance of establishing social media disclosure policies and informing employees about the company’s policy toward their use of Twitter, blogs and other channels for discussing company business.

SOCIAL MEDIA PIONEERS

Despite the ambiguity of legal and regulatory issues, a small-but-growing number of companies are using social media for IR. Within this group, Twitter has emerged as the early favorite due to its simplicity and ability to link back to news releases, conference call announcements and other disclosure information thatresides on the company’s website.

Research that supports this includes:

• A recent study by Q4 which identified that 55% (of a sample of 80 companies with Twitter accounts), are using Twitter for IR, with the companies mainly providing links back to their earnings release, conference call notice and webcast.
• A few of the companies included in the study – eBay and CGI group even live-tweeted the earnings call. Both of these companies type the tweets out ahead of time, which are derived from the conference call script, ensuring that they only post words on Twitter that are being communicated on the conference call.
• Other uses of Twitter by public companies include reporting from annual shareholder meetings (J&J and EMC Corp) and analyst days (eBay).
• Dell does have a Twitter account, but they are believed to have the first corporate blog dedicated to investor relations – each quarter, Dell records a video conversation (Vlog) with its CFO to announce and explain recently disclosed earnings results.

Robert Williams, Director of IR for Dell was interviewed for the report and said he’s “surprised” that more large-cap companies have not followed Dell’s lead and established IR blogs. He cites the following three reasons:

1. The small size of most IR departments. Unlike Dell, which has seven people on its IR team, the average company has only one or two employees dedicated to IR.
2. A lack of understanding about blogs. Williams said many corporate executives worry that blogs will be difficult to manage and that they won’t be able to answer users’ questions.
3. The fear of disclosure mistakes and shareholder lawsuits.

Williams feels that it would be hard for a small (one or two person) IR department to manage a blog along with all other expected tasks, but in a recent webinar he listed five things for larger companies to consider before starting an IR blog:

1. The blog should not be used as a substitute for news releases, SEC filings and the traditional means for communicating material information.
2. It must be credible by communicating factual and accurate information and avoid expressing opinions on investor issues.
3. It should be strictly for investor communications and should not be used for marketing the company’s products and services.
4. An IR blog can be an effective tool to counter misperceptions about the company without responding to specific rumors.
5. It’s important to view the blog not only as a means for distributing information, but as a way of listening to what your investors are saying.

Public companies who are using social media for IR are finding they can leverage their time and investment by coordinating their efforts using multiple social media tools together. For example, both Dell and eBay use Twitter to announce new postings on their blogs and Dell posts its Vlogs on YouTube. This can significantly expand the audience and drive more traffic back to their website and blog.

OTHER SOCIAL NETWORKS

As stated, more companies seem to be using Twitter for IR than are using Facebook, LinkedIn and YouTube. For example, although Facebook is being used by public companies the pages appear to be managed by corporate communications, PR or marketing departments, not by IR.

Many companies in this study were found to include links from their corporate websites or blogs to accompanying information on Twitter, Facebook, LinkedIN, Flickr and YouTube. No companies were identified that use MySpace for IR.

Another emerging category of tools are document-sharing or “content” sites that allow IROs to expand the distribution and improve the display of existing types of corporate documents, such as news releases, presentations and SEC filings.

For example, SlideShare is one of the more popular document-sharing sites that enable companies (and individuals) to post PowerPoint presentations, PDFs and other document formats on a public site where they can be viewed. In a recent webinar by Q4, SlideShare was described by Q4’s co-founder and CEO, Darrell Heaps as “the YouTube of presentations”.

SlideShare makes it possible for a company’s presentation to go “viral” and be spread from investor to investor, either via e-mail, embedding on a blog or website, or through a host of other tools.

Lastly, Docstoc is another document sharing site with an emphasis on content other than presentations such as news releases or reports, which can then be shared by readers or embedded on their website and blogs.

IR & SOCIAL MEDIA: LOOKING AHEAD

According to Dave, “A growing number of IROs already understand the potential of social media, and it may be only a matter of time before social media tools become as mainstream as websites and conference calls in modern corporate IR work. The SEC could encourage this development by providing more definitive instructions to guide companies as they chart their way through these new waters. Those instructions would help eliminate the most worrisome objection to the use of social media at this time, the fear of regulatory and legal risk. Hopefully the SEC will partner with NIRI, the stock exchanges and other interested parties to develop critical guidelines for the use of social media in corporate investor relations practice.”

I completely agree, and (without dating myself too much) remember the day when people worried about having conference calls – now the investment community raises an eyebrow if a company doesn’t have an earnings call! More direction is needed by the SEC – while some companies are taking the first steps and becoming pioneers in their use of social media, others need some guidelines to help them get started.

I previously blogged about tips that can help IROs get the C-suite on-side with adopting social media for IR. Perhaps if concrete guidance is put out by the SEC, IROs could use this guidance (in addition to research that shows that public companies are using social networks for IR), to provide to their legal and management teams as evidence that social media can be used effectively if executed within regulatory guidelines for IR.

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We had intended to write a follow up post that summarized the event, but IR Magazine beat us to the punch with “IR in the age of social media” .  Rather than duplicate the post we thought we’d just point you to their blog.

Here’s a quick quote by Darrell:

‘The risk posed by social media for your company … exists whether you participate or not,’ observed Darrell Heaps, CEO of Q4 Web Systems, an IR website and communications firm out of Toronto. ‘If you’ve ignored social media and said there are too many risks, we‘re not going to get involved, then you are putting your company at higher risk … than if you know how to use the tools. The market doesn’t care whether or not you’re there. They’re going to use the channels that are most readily available to them to put their message out.’

Read the full post on IR Mag’s blog “IR in the age of social media”. Thanks to Brad Allen for the great write up.

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Mike Willis, Partner, PricewaterhouseCoopers
Chairman, XBRL International

Panelist(s)/Co-Speaker(s):
Michael Becker, VP, Global Disclosure & Financial Reporting Services
Business Wire

This session was quite comprehensive, so I thought it would be useful to discuss the agenda that was put forth:

WHY IS THIS RELEVANT?
Public companies push out a lot of IR content such as earnings releases, quarterly reports and annual reports.  Once disseminated into the public domain, third party information intermediaries distill, transcribe and structure the company reported information into their proprietary taxonomies and sell that structured information to the analyst community.  This third party intermediary information is also available through sources such as Yahoo! Finance, Google and MSN Money.  From these publicly available sources IROs can directly observe the omissions, errors and other communication problems created by the third party intermediaries such as changing disclosure concepts and/or omitting key company specific unique disclosures.  This intermediary distortion in turn can lead to inquiries that don’t make any sense or worse, no inquiries at all – which means the investment community is solely relying upon the data transcribed and rendered by third party sources, thereby diminishing the company’s opportunity to correct any errors.

If you are skeptical of the degree of errors and omissions to your company reports please take a minute right now and go to the public sites and review the data available for your company and compare that information to your company reports.  “The data provided by intermediaries is incorrect as often as 30% of the time and incomplete 100% of the time“. The typical omission is the unique company specific disclosure, which is highly relevant to company IROs.

This is unfortunate, as preparing and finalizing material documents is typically a very time consuming and costly process, largely due to manual assembly and review processes that draws upon a lot of internal resources such as the finance, legal and IR department’s time to compile, review and publish – not to mention the costs associated with filing with the regulatory bodies and mailing out hard copies.

WHAT IS REQUIRED?
As some of you may know, in January 2009, the SEC introduced a phased mandate for filing in XBRL starting with the largest companies with a worldwide public float of greater than $5 billion – periods ending on or after June 15, 2009 and then extending to all sizes of companies over the next three years. The rules require companies to provide their financial statements on their corporate websites in an interactive data format using XBRL at the same time their financial statements are submitted to the SEC.

Content Requirements
In the first year of filing in XBRL format, issuers are required to tag each unique disclosure concept in the company primary tables (balance sheet, income statement, cash flows, changes in equity) and “block” tag (e.g. one tag per note) the financial statement footnotes and schedules.

In all subsequent years of XBRL formatted exhibits, issuers are required to tag the financial statement disclosures and also individually tag each significant accounting policy, table within a footnote and each quantitative amount within a footnote.  It is this second year requirement that significantly enhances the volume and accuracy of company disclosures available to the analyst community in a very cost effective, accurate and timely manner.

The XBRL Exhibit is required to be filed concurrently except for the initial report in each of the first two years which would be due no later than 30 days subsequently.

For purposes of the company SEC exhibit, the MD&A, executive compensation, or other financial, statistical or narrative disclosure outside the financial statements is not permitted to be tagged.

Corporate Website Posting Requirements
The XBRL filing is to be posted on a company’s corporate website by the end of the calendar day submitted or required to be submitted to the SEC.  The XBRL exhibit must remain on the website for at least one year; however, legal liability provisions are phased out over a two-year period with no “required” involvement by the auditor.

The US SEC rules will apply to public companies and foreign private issuers that prepare their financial statements in accordance with U.S. generally accepted accounting principles (U.S. GAAP), and foreign private issuers that prepare their financial statements using International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

WHAT IS IT?
XBRL is a freely available international information standardized format specifically designed for business information.  As such, it is specifically designed to provide supply chain standardization to address pervasive process problems.  XBRL is applicable to business information, related business rules, formulas and controls to not only to make financial information easier for investors to analyze, but also to assist in automating regulatory filings and business information processing.

As an Internet standard, XBRL can be used to create a common language for disparate proprietary software applications to more seamlessly communicate.  This is sort of similar to html but in a more granular manner and specifically for business information.

WHAT’S IN IT FOR THE ISSUER?
There are many implications of using XBRL to improve processes.  For example, issuers can implement using the bolt-on approach in which filings and reports are created following the existing process and converted to XBRL once finalized, either in-house or by a third party.  There is also the embedded option, which would enable companies to map their disclosures to the XBRL US GAAP Taxonomy directly within their report writer or consolidation application.  Pushing standardization further back into the business information supply chain provides structure for automation of downstream processes including the accurate rendering of XBRL-tagged SEC filings that can be accessed via your website with many interactive features.

Embedding XBRL in corporate reporting processes enables:

• Seamless exchange of information between software applications like your website and your analysts’ modeling applications,
• Automation of manual processes = lower costs, improved quality & timeliness like for your summary tables and graphs provided on your website,
• Enhanced transparency, access and control of information contained across a wide range of disparate internal data stores similar to the wide range of internal data stores that you are trying to access to address performance related inquiries,
• Improvements in data quality and access, and
• Better access to more relevant information for better decision-making, enhancing business intelligence and performance management information.

XBRL is more than a trend that IROs must be cognizant of – it will soon be mandatory for all U.S. based issuers and there is a voluntary program currently taking place in Canada to help the Canadian marketplace gain a greater understanding of this information standard.  Therefore it is essential that there is a full understanding how communication between the investor community and IROs evolve with the XBRL standard.  So stay tuned for additional blogs and presentations on XBRL.

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Panelists were:  Timothy Carey, Managing Director, Digital Media, ICR, Inc; Ruth Cotter, Director, IR and Treasurer, Advanced Micro Devices; Eileen Cassidy Rivera, Vice President, Communications & Investor Relations, Vangent, Inc., and Darrell Heaps, President, CEO & Co-founder, Q4 Web Systems.

Michael opened the session by asking each panelist to introduce themselves and to describe their involvement /perspective on social media.

Eileen was a new user of social media and referred often throughout the session to the need to get one’s message down to 140 characters. In looking at the Vangent Inc. site, I didn’t notice any reference to Twitter. I searched Twitter for both Eileen and Vangent  Inc. but didn’t find anything, so I assume that Eileen is in the very early stages of adopting social media. Her newness in the area may have served as an inspiration to attendees who were thinking of also getting involved.

Eileen felt that IROs needed to look at getting information out in more new and creative ways in order to reach audiences who might be looking outside of traditional media. And to give these audiences better ways to access information. She said that brevity of message was important in social media.

Ruth said that “Content is king and even more so in social media. It’s a challenge for IROs to adapt their content for social media.” The AMD site was chock-a-block with all kinds of social media – in fact, I had to pull myself away in order to get back to writing this post. It’s obvious that the AMD culture has embraced this new technology. This page in their corporate section includes links to FriendFeed, YouTube, Facebook, Twitter, Flicker, Videos, Blogs. Other than one video for an Executive speech , social media hadn’t penetrated IR communications to the same extent but it’s likely that the road has been paved for Ruth to more easily expand the role of social media for investor relations.

Darrell said that “social media has added another layer to communications – it doesn’t replace the old. It just gives you one more way to get your information out to people who want to access it through social channels.”

Tim agreed and said that “a lot of the tactics that IROs use are still important. It’s not about replacing the old, it’s about having the right strategy to integrate social media into the investor relations program.” The entire panel concurred.

Darrell referenced a panel that he attended the day before on Trends in Media & Technology, where Robert Williams, Director Investor Relations at Dell Inc., had mentioned his surprise the volume of internal responses he received when he solicited questions for his quarterly earnings call. Darrell said that, “Social media drives more internal dialogue as companies respond to things that happen in the market. This can have a positive effect in bringing divisions closer together and in getting input from other areas of the company.”

Mike then asked each panelist what they felt was the largest trend or change in communications that new technology was leading to – was it social networking? Blogs? Enriched content such as video, photos and audio assets?

Ruth said that one of the greatest changes in communication was the ability for social media to address issues in a much faster way than traditional media. She had a great example of how social media helped to solve a market misperception about her company. AMC’s valuation had been discounted by the market because of perceptions about battery longevity. This problem actually stemmed from inconsistencies in the way that battery longevity was measured. Her CEO started a blog that ultimately resulted in changes in how battery life was measured, which soon dispelled this misperception.

In speaking with numerous issuers Darrell has heard many of them express concern about rogue comments in social media and their hesitation to get involved in blogging. Darrell felt that a good place for issuers to start, was to think of SM as a notification system, “60% of web users are using social media – issuers should think of it as an additional way to get information out. Today that means using your existing content, information that has already been vetted through your disclosure controls and procedures to give broader dissemination to this information”.

Tim felt that video had a key role to play, “Video makes things more personal. It puts a face to a name and helps viewers get to know a company better.” (This perspective supports a lot of what we heard the day before from both Laura Graves of Cisco Systems and Dell’s Robert Williams, who also both felt that video didn’t always have to be high production.)

Mike then asked Ruth about challenges she faced in incorporating blogs into IR communications, despite the fact that as a culture, the company seemed to really embrace blogs for product initiatives. He also asked her what IROs should be looking at before jumping in – what rules should they be thinking of.

Ruth, admitted that it was a challenge to get the company to accept blogging for IR. She said that issuers really needed to train their employees on using social media on behalf of the corporation and that employees also needed to be mindful of what they were communicating in their personal social media channels. She gave an example, of an employee had once mentioned on his Facebook page that he was going to be away and the specific location he mentioned led to a market perception that a deal was in the works (which it was). This resulted in movement on their stock. (I heard a very similar story from another executive in a social media webinar I attended last year – different company, but essentially the same story.)

In terms of what companies should do to prepare for their involvement in SM, Ruth felt it important to have a social media policy in place.  She also said that AMD provides in-depth training for their employees on social media and that employees needed to get an internal license in order to use SM on behalf of the company.

At this point, numerous questions came from the audience – it was clear that attendees were very engaged in topic. One person asked how to monitor who was talking about their company?

Darrell said that there were numerous ways that one could automate this, including subscribing to Google alerts for mentions of your company. (This same question came up in the Trends in Media and Technology and Serena Elrich of Start-up Army offered a number of free monitoring services.)

Another person asked, “How do I keep up with responding to all of the mentions?”

Ruth said that, “The purpose of social media is to spur a conversation so we don’t usually respond. You have to consider how important it is to respond on a case-by-case basis.”

The next question asked by an attendee was, “How many big institutional investors are involved in social media?”

Darrell said that as an example Seeking Alpha, a portal for financial blogs, was visited by 4 million unique users per month, and that 1 million of these were institutional investors.

Following this, someone asked, “How do I get my information out to analysts and institutional investors?”

Tim responded by saying that short videos were a good format – again largely because they expose other people within the company. Ruth agreed with this and said that her company found them very valuable.

Darrell said, “You need to repackage your content to make it easier for them to consume both on your site and in social media. For example, instead of just providing your presentations in pdf format, also use Slideshare, which makes for a much better user experience and makes it easier for others to share your content.” He felt that it was, “Important to get involved in social media and be a part of the conversation so you know what’s going on. You can’t ‘control’ the conversation, forget about that, but you can help set the tone.”

“You also need to look at your corporate/IR website and consider the role that it plays. Right now, with current budget cuts, public companies are focusing more on face-to-face meetings, but what does that analyst do before he goes to your meeting? He looks at your website for context on your company. And what does he do after he leaves your meeting? He goes back to your site to verify the facts that came up in the meeting. You need to understand this and stop using your site as a filing cabinet – you need to use it as a strategic tool to provide more context.”

Tim agreed and said, “If you have a good vision, a good leadership team and strong performance you should bring this all together to help users understand why they should invest.” (I talked about this very topic and gave some good examples in an IR Website Best Practices webinar we ran a few weeks ago. )

The topic then turned to using social media for issues management.

Ruth said that using social media could get the word out so much faster than traditional channels. (See reference to Dominos versus Wendy’s in my June 10 post as a great example of this.)

Tim felt that issuers should have a strategy in place for issues management through SM, before a situation arose, so that when an incident occurred, they knew how to respond.

Darrell felt that it was important to be proactive – if a company knew that a situation was going to be contentious, it was better to be out in front communicating about it before a problem arose. He said that Barrick had done a good job of this related to a specific mining site, where they anticipated community backlash. By being upfront, they were able to address concerns before they became problems.

Questions were still being asked as the clock ran down and the time was up.

Clearly this topic continues to be of great interest and companies need to find ways to get involved that suit their cultures and their comfort level.

As I was using TwitterBerry to tweet the session live, I may have omitted something, so if you attended or were a panelist, I look forward to your comments.

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