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Archives for 2009

Avoiding Twitter Trouble – Legal and Regulatory Issues for Investor Relations

When it comes to using Twitter for Investor Relations, one of the first issues to jump into people’s heads – especially people who went to law school – is how to comply with the wide range of rules and requirements that regulate corporate communications with investors. However, some simple strategies can help you avoid most IR difficulties.

Twitter and IR – What Are the Rules?

One of the difficulties in establishing a Twitter strategy for business and investor relations is the lack of formal rules or regulations. Many pundits point to the recent interpretive guidance published by the Securities and Exchange Commission in August 2008 in analyzing how the SEC stands on using online resources such as Twitter. However, this is badly misguided.

The guidance published by the SEC is specific to the official website of the corporation and has no applicability to un-owned, or uncontrolled websites and services such as Twitter. Indeed, the SEC guidance expressly details several features that must be present and several that should not be present on the company IR site in order to be recognized as acceptable under these guidelines. Obviously, the company will have no control in either adding or removing such elements from social networking sites such as Twitter.

Thus, the rules that apply to Twitter are the same rules that apply to all IR communications. The challenge, then, is not in finding and understanding new rules, but rather applying the old rules to a new venue.

Twitter Trouble Pitfalls

The issues that seem to raise the most concern are the improper release of inside or material information on Twitter. Ironically, this is likely to be among the easiest problems to avoid. After all, employees and executives in the IR Department have been dealing with this very same issue for years in every other existing form of media. The same training and experience that ensure that no investor relations professional makes inappropriate remarks during interviews, in emails, letters, or phone calls can provide the same security when it comes to posting official company tweets as well.

The real difficulty lies in being unable to implement the safety mechanisms that have been used by IR for years in communicating with the public. Many of the key phrases, approved wording, and the like are simply too cumbersome to fit into Twitter’s tiny allowable message size.

For example, an IR Department Manager named Lisa is heading up her company’s new real-time communications strategy on Twitter. Lisa is a smart, dedicated, employee with plenty of experience who understands the rules and regulations that govern investor communications. Her responses to many inquiries are well rehearsed and perfectly legal in every way.

Lisa is responding to a shareholder’s question, posted in breathless fashion as a tweet on Twitter, regarding the company’s recent decision to reduce the shareholder dividend in a difficult economic environment. The question insinuates many unfounded and negative fears and opinions about what happened to the dividend, and why. Lisa has already worked with upper-management and the legal department on how to best answer these queries and has done so numerous times since the decision was first announced. However, there is a growing chorus, mostly online, that the company is in dire trouble and that this is only the beginning of many terrible actions to come. Some are even claiming to have “inside” information, or a contact within the company that is secretly letting them in on how bad things really are.

This scenario is all too real and happens all too often. However, it is also precisely the kind of situation that can be helped quickly by using Twitter. The vast majority of muckrakers and naysayers on the web are not only misconstruing the situation, they aren’t even shareholders, and most have done no more analysis than read a concerned headline or two before drawing big conclusions. While such people will not be mollified by any communication, on Twitter or otherwise, the real shareholders and real analysts will take seriously an official reaction coming from the company.

Of course, this possibility has existed all along, for any shareholder willing to contact the company directly, or who has subscribed to communications from the corporation. Unfortunately, to many Main Street investors, these possibilities don’t occur to them, and instead, they assume that the company is encamped inside its corporate walls in deliberate, and telling, silence.

The value Twitter brings to IR communications is the ability to “pop-up” and provide answers to any user that has “followed” the company. Just as important, that same message can carry on second-hand, but still as an official answer, to the followers of anyone that re-tweets the company’s message. As an added bonus, the company’s official message will continue to be available on Twitter to those investors and potential investors whose concern comes after this particular wave, as an item they can reference and verify themselves simply by scrolling back through the company’s tweets.

Of course, these same factors are the reason it is critical to get the message right the first time.

Just Too Big for Twitter

The answer Lisa wants to give goes something like:

“While the Board of Directors recognizes the company’s long history of increasing dividend payments, as well as the importance of the dividend to the company and its shareholders, it was determined, after analyzing several possibilities and consulting with both management and other experts, that it was in the best long-term interests of both the company and its shareholders to reduce the dividend at this time.”

make-it-fit-twitter Obviously, this is much longer than 140 characters (414 characters according to my word processor). The danger arises as Lisa tries to pare down the language to fit into Twitter’s restrictive size requirement.

The difficulty lies primarily in attempting to reconstruct the non-committal nature of such statements with the intention to communicate the possibility of improvements more to the shareholder’s liking. For example, note how the statement gives the impression that this reduction is neither permanent, nor standard course, but avoids stating either explicitly. It also vaguely alludes to the fact that other alternatives were considered, though it makes no mention of how seriously those options were looked at, nor how much more appealing those alternatives might have been to stockholders. This statement also tries to position the company and shareholders on the same side, while stopping short of any characterization of the company action as it relates to shareholder wishes.

Not to mention, when given in writing, this statement is no doubt included with a disclosure statement.

All of this is accomplished with the careful consideration of exactly what words are used. Trying to recreate the same effect with fewer words is tricky at best. In fact, a typical “forward looking statements” disclosure takes more than 140 characters. (Just the phrase forward looking statements is 26 characters.)

In order to successfully execute a social media strategy, investor relations executives like Lisa, need a solid, reproducible strategy to ensure that they create useful, ongoing, tweets, without opening the company up to additional liability. Fortunately, a few simple tricks can give any IR Department all the latitude they need to create and respond to posts on Twitter.

In my next post, see what Lisa and other Investor Relations Groups Need: Complete Twitter Strategy Rules for Investor Relations.

Effective Corporate Ethics — More Than A Code Part 1

Crises in the global economic and financial landscape reached seemingly epic proportions. Once again there is a focus on ethics–

Failed Leadership Caused the Financial Crisis

We need to do more than fix the crisis; we need to fix the mindset that got us into it. …They should be authentic leaders, focused on serving their clients and all the institution’s constituents, rather than charismatic leaders seeking money, fame, and power for themselves.

Bill George, professor of management practice at Harvard Business School, US News November 19, 2008

Despite lessons learned during the Enron era, government regulations, and companies’ codes of ethics,  surveys indicate problems with ethics.

  • The Edelman Trust Barometer indicated that trust in business fell below those of the Enron era
  • Surveys by Integrity Interactive Corporation and Alt­man Weil, and CFO Europe Research Services (free registration required) both showed that most companies do not go much beyond issuing codes of ethics
  • Compliance Week’s 2009 Global Integrity Survey indicated “…Accord­ing to the findings, 43.3 percent of respondents don’t measure the integrity performance of management at all. Of those companies that do, 29.9 percent grade their management through an employee review process, followed by 26.8 percent that tie compensation to integrity. Only 11.5 percent of respondents said they grade integrity performance through internal benchmarking.”

…there is a gap between the existence of explicit ethical values and principles, often expressed in the form of a code, and the attitudes and behaviour of the organization…two basic reasons appear to be at the heart of the problem: ineffective ethics programmes and deficiencies in corporate culture…corporate ethical values requires well-designed ethics policies, sustained ethical leadership and incorporation of ethics in organisational processes and strategy as part of an ethical culture at all levels of the organisation.

Corporate codes of ethics:necessary but not sufficient
Simon Webley and AndreaWernern Business Ethics: A European Review Volume 17 Number 4 October 2008

Perhaps the key reason is that most companies don’t realize that ethics must start with “the tone at the top”. Board and C-Suite members must be visible in promoting ethical behavior and putting in place an ethics program that promotes an ethics culture. This takes considerable effort and time since it must be embedded in the existing corporate culture. Perhaps this deters most companies.

Here is an example from the Bell System (old AT&T) before the 1984 divestiture. The Long Lines unit had a culture that promoted employee safety. Some elements included–

  • Every employee had to attend a monthly safety presentation on a variety of topics
  • Employees received desk drop materials
  • Safety posters were displayed in public areas
  • If there was an accident, a report had to be completed and sent to head of the department within 24 hours
  • There was an annual event for employees and their families
  • Even at the annual off-site middle to upper management conference, there was a safety presentation before the agenda started.

This is the type of effort that is needed to ensure that all employees know that they must be ethical in all matters.

There are some current companies that do understand that ethics must be promoted every day. These companies will be profiled in future posts.

Do Consumers Care if Kraft Acquires Cadbury?

Just a few years ago Cadbury purchased a number of consumer products from Pfizer after the pharmaceutical behemoth acquired Warner Lambert.  Products like Trident gum, Halls cough drops, and more joined the Cadbury Bunny lineup of confectionery products.  None of the brands seemed to suffer, and Cadbury shares enjoyed a nice boost.

But what’s next for those brands?

Well, if Kraft has anything to do with it, those Cadbury-owned brands will join the Kraft lineup, which already includes Oreo and Philadelphia Cream Cheese, in a hostile takeover of Cadbury by Kraft.

And here is where the branding conundrum begins.  Do consumers truly notice when brands are sold and acquired?  Are they insulated from the activities of the parent company on a consumer level?  That certainly seems to be the case for Trident, Halls, Oreo, and other consumer products that are not closely tied to a parent company brand name.  Naturally, it’s not always the case though.

And does a lack of connection to a parent company brand make a product brand more attractive for hostile or friendly takeover?

I think the argument could certainly be made that allowing product brands to stand on their own can make them more valuable, particularly in today’s climate of rapid news sharing, excessive lawsuits, and shady business practices.  I suppose it’s a cyclical battle that mirrors the historical pattern of corporate centralization to decentralization, back to centralization, then decentralization, and so on.

So I’m playing devil’s advocate and asking what you think?  In today’s world, is it better for product brands to disassociate themselves from their parent company brands or is there still value in tying product and company brands together?

Interesting Insights from the 2009 Groundswell Awards


Groundswell

If you haven’t heard of the Groundswell Awards—not to worry.  It appears this is just the third year for the fairly small competition, sponsored by Forrester via the Groundswell weblog which apparently spins off the book named Groundswell (stick with me here) by Forrester analyst Josh Bernoff and consultant Charlene Li.  Everything I know about the awards I learned from reading the Forrester Groundswell Awards Rules, which says:

“Entries should represent excellent and effective use of social technologies to advance an organizational or corporate goal.”

Sounds good!  And there is a recruiting-related category in the awards, which we’ll get to in a minute.  But first, here’s what especially interested me about the Groundswells:  (a) the structure of categories, and (b) the proportionality of the submissions.

Submitters have to choose a category that best fits what they see as the strength of their submission.  The categories loosely parallel the ideas in the book, and they go like this:

Listening. Find out what customers are really saying in order to understand them better.

Talking. Spread messages about a company.

Energizing. Get a company’s best customers to evangelize its products.

Spreading. Get customers or users within a company to encourage others to adopt a product or service. (B2B only.)

Supporting. Help customers support each other to solve each other’s problems.

Embracing. Integrate customers into the way a business works, including using their help to design products and improve processes.

Managing. Empower employees and managers within an organization.

Social Impact. Improve society with non-commercial applications.

Even apart from the social media component, this list strikes me as a pretty good anatomy of all the things a corporate Careers site needs to do.  Just put “visitors/prospects/applicants/candidates” after each verb, and you would have a fine strategic outline.  That is—“Listening to visitors,” “Energizing prospects,” “Embracing candidates,” “Managing applicants,” and so on.  (Social Impact applies via messaging about corporate responsibility, green-ness, etc.)

Now for proportionality.  Groundswell helpfully offers mini-views of all the submissions, so we know how many submitters put themselves in each category.  Just guess which Business-to-Consumer category had the most entrants by far . . . .

That’s right.  TALKING.

In spite of all the wisdom out there about listening, most companies are still focused on pushing the message.  Business-to-Business was more evenly distributed—but showed even less interest in Listening than the B2Cs.  Here’s the Groundswell breakout:

Groundswell Submissions

Topic to consider:  Does your company’s Careers site have a listening component?  How hard would visitors have to look to find the listening component?

The Groundswell award for something to do with employees is (somewhat oddly) Managing, and for some reason, it’s bundled up with non-profits.  But in any case—this year’s winner is UPSjobs Problem Solved, “a ‘spreadable’ social media campaign to efficiently and more cost-effectively attract, engage, and recruit jobseekers.”

But I found one of the other entrants especially interesting:  The Employee First campaign at India’s HCL Technologies, where “all 55,000 employees of HCL Technologies are given intranet access allowing them to read the reviews of HCL’s CEO Vineet Nayar and the company’s top 20 managers.”

Stop by the HCL Careers site to read more about Employee First, and the “Five Fold Path to Individual Enlightenment.”  Very interesting.




Motorola Droid says iDon’t to Apple’s iPhone

Today is the day!  Verizon Wireless is rolling out the Motorola Droid with the hope of winning back market share from customers who defected to AT&T Wireless and the Apple iPhone.  With the Droid, backed by Google, Verizon Wireless just might have a chance.  Where the Blackberry Storm failed, Google and Droid might succeed.

Verizon Wireless is certainly attacking the iPhone head-on with its new Droid ads.  Check out one of the commercials below.  There is no doubt what the message of this ad is.

Of course, it’s just Day 1, so the verdict is still out, but smartphone consumers have been waiting anxiously for Verizon Wireless, considered to have the best network in the United States, to catch up to AT&T and the iPhone.  Can the Droid on the best network compete with the coolest phone on a substandard network?

Keep in mind, Verizon Wireless had the opportunity to be the “it” wireless carrier.  The company was given the chance to pick up the exclusive iPhone deal with Apple, but the company passed.  The result?  AT&T stole some market share and Verizon Wireless hasn’t been able to recoup those customers yet.  Without its superior network and the continued hold on the business marketplace by RIM’s Blackberry, Verizon Wireless would really be in trouble.

Fortunately, Verizon Wireless realized that the clock was ticking.  The Storm might not have delivered (although rumors of a new version of the Storm leave some consumers hopeful of improvement), but the Droid just might.  Let’s face it.  There seems to be a battle to take over the world in terms of brand dominance.  For the tech-related world, Google and Apple are leading the pack but in very different ways.  Now, they’re poised to battle somewhat directly.  Who will win?  This should be fun to watch!

And that brings me to my question — what smartphone would you get?  The Droid on Verizon Wireless’ network or the iPhone on AT&T’s network?

Two Simple Rules for Better Job Descriptions


Decoder Ring

I recently had occasion to look at a job description for an IT contract position.  I could recognize a lot of the words, but the way they were put together gave me almost no clue what the company really needs someone to do.  So I called a friend who’s pretty far up the IT food chain and read it to him, just in case I was being dim.  Neither of our secret decoder rings was up to the task, however, so we could only speculate about what the job might really be—or who could do it well.

This description came from a big company and went through a reputable recruiting agency.  In this case, of course, part of the problem relates to the process itself, since in many cases outside recruiters cannot talk to the hiring manager in order to clarify the description and requirements.  So if the hiring manager—or whoever wrote the description—is not very good at describing jobs, an HR intermediary may not know the difference, and the mystery document will just get propagated out to the recruiter(s) and passed on to the prospects.

Internal processes can be just as problematic–and when a confusing or inadequate job description makes it onto the Careers site or the job boards, job-seekers are at a considerable disadvantage, since they have nothing else to go by.  In these days, when applications are many and keywords often rule, applicants have to figure out how to highlight their qualifications; and that’s tricky when the requirements are not clear.

In the description that prompted this post, I found several common problems, such as:

  • Requirements that just say “Understanding of X”.  (The spectrum of interpretations that can be applied to “understanding” is broad indeed!  Define the word?  Know X when you see it?  Eat, sleep and breath X?)
  • Requirements that seem to be repeating other requirements in different words.    (Is there a subtle-but-important distinction?  Or just two different authors?  Perhaps a careless revision?)
  • Requirements that use names in a vague way, and/or acronyms.  (Is the requirement referring to ” X the product” or “X the methodology”?  Is that unfamiliar acronym a variant, a typo, an internal reference, or just something that hasn’t made it to Wikipedia yet?)

I could go on.  But the net result is that candidates for this position will not have a good idea of what’s involved in the job until/unless they get as far as an interview.  Therefore they won’t be able to make an informed decision about applying or not.  They won’t be able to tailor their resumes appropriately.  Et cetera.

And the manager(s) will spend unnecessary time looking for the “right” person, who might not even be found.  A lot of misfire hires result from failure to define and describe a job effectively.

People can learn to write better job descriptions, and they should.  But in the end, there are two really basic practices that will make a huge difference:

  • Use simple sentences.
  • Use simple words.

Just following those “simple” rules will eliminate ambiguity most of the time.  And don’t take my word for it.  Get some good advice from HRDailyAdvisor.  (Yes, they’re selling something, but the advice is good anyway.)


(Want your own “decoder ring”?  Get it from the Exploratorium.)