How Investor Relations Should Get Started in Social

Seventy-nine percent of Fortune Global 100 companies are using at least one social media platform.  But according to a survey by BNY Mellon, only 9% of global senior level investor relations professionals are using social media for IR communications.  Investors are a critical audience for a company to engage and data suggest blogs and social networks are appropriate channels. So why is investor relations shying away from social?

A research project I conducted last month for Dachis Group indicates that many investor relations professionals are not leveraging social media because they lack the following:

  1. Clear corporate guidelines that address the disclosure of financial information and IR participation
  2. People, processes and technology to support IR participation
  3. Understanding of how social media adds value to investor communication given the required investment of time and resources

The need for clear corporate guidelines

Interest in leveraging social channels by IR is constrained by the perceived risks of violating the disclosure process regulated by the SEC. Although the SEC has issued guidelines to recognize ‘interactive websites’ (i.e., corporate blogs or forums) as sufficient channels for public disclosure, the language citing the conditions these websites have to meet to fulfill the requirement remains vague and outdated to know how it will be enforced. The SEC first introduced Regulation Fair Disclosure in 2000 to prevent selective disclosure of material information that would lead to the benefit of only the few who were informed. The new regulation required companies to publicly announce material information in a way that would be broadly disseminated.  In 2008, the SEC provided additional guidelines to include interactive websites as an acceptable channel for this information.  We have included an excerpt from the 2008 Regulation Fair Disclosure update below:

“Thus, in evaluating whether information is public for purposes of our guidance, companies must consider whether and when: (1) a company web site is a recognized channel of distribution, (2) posting of information on a company web site disseminates the information in a manner making it available to the securities marketplace in general, and (3) there has been a reasonable waiting period for investors and the market to react to the posted information.”

Additionally, the 2008 guidelines state that a company (or employee acting on behalf of the company) is responsible for all statements he or she makes on these ‘interactive websites,’ but a company is not responsible for the comments made by third parties on its website.

To be fair, the SEC guidelines are not preventing investor relations professionals from leveraging social media.  It’s more the fear of how to leverage such an unregulated and uncontrollable medium in a regulated and controlled environment.  The perceived risks put Legal departments on edge and many investor relations see the task of incorporating social media into reporting practice an uphill battle until the SEC or company executives provide greater guidance.  In my experience working with clients in regulated industries, I have found the combination of social media policy and training to be the most effective way to encourage participation.

The need of supporting infrastructure

Most investor relations departments do not have the people, processes and technology in place to support the use of social media specifically for influencer and investor communications.  Furthermore, no investor relations professionals I interviewed last month have dedicated budget for social media.  Investor relations budgets are primarily dedicated today for funding website upgrades, annual reports, road shows and conferences. Therefore, investor-related messages promoted via social channels are driven by Corporate Communications/PR most of the time – as this is the department who is responsible for maintaining and managing the corporate social media account.

The potential issue with this arrangement long-term is that investor relations remains one step removed from the conversation by relying on Corporate Communications/PR to disseminate and respond to messages in social channels. This seems like a recipe for less authentic investor-related messages that sound more like broadcasts rather than conversations. This arrangement also poses challenges to synchronizing investor-related messages across all websites. Already we see signs of this divide.  A recent IR Web Report audit of 200 investor relations websites showed that 90% of them still ignore corporate presence on social media, even when other sections of the corporate website promote these channels.

The need to know the added value

According to the BNY Mellon survey, IROs are split as to whether social media even offers value.  Social media fosters conversation but most investor-related social messages are written as broadcast announcements that point back to the IR website for more information.  Therefore, most investor relations professionals are trying to figure out what additional value these messages offer to investors who have been trained for years to visit the corporate website for the most accurate and up-to-date information.  The issue is that value has to be defined by each IR department, but most IR departments are not involved in corporate social media participation to know what to expect.  If the goal of each investor-related social media message is to drive traffic back to the IR website, for example, then this activity has to be tracked, measured and reported back to IR for them to understand the value.  The coordination of these activities is challenged when IR is not involved in the message creation and dissemination process.

I recommend that investor relations professionals seeking to incorporate social media into future reporting practices follow the five steps outlined in the graphic below to know how best to get started in social.

Source: Dachis Group,, December 2010.

In my experience, I find that taking the time to thoroughly research the external and internal social media landscape as well as define participation guidelines and goals provides a solid foundation from which to build a successful social participation program.


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