Wiki Whistle-Blowing Creates PR OPs

Now that WikiLeaks is not entirely “blowing up” the news, it has given me time to think about one of the latest Wikileaks developments dating back to December 2010.  An online article “Be Afraid,” published by The Economist, states that,

“WikiLeaks, a whistle-blowing website, promised to publish five gigabytes of files from an unnamed financial institution early next year, bankers everywhere started quaking in their hand-made shoes.”

My question is this: How does the exposure of commercial secrets, such as those published by WikiLeaks, affect stock valuation? This question is a little tricky.  Let’s look at short-term and my predicted (optimistic) long-term effects on companies and stock affected.

Short term: After Wikileaks’ founder, Julian Assange told Forbes that he was going to leak a massive amount of information on an American bank, Bank of America’s stock dropped close to 3%.  Keep in mind that last year, Assange was quoted by Computer World, “At the moment, for example, we are sitting on 5GB from Bank of America, one of the executive’s hard drives.”  In a nutshell, BofA stock dipped 3%; however, the next day it recovered by 1% .  These percentages show BofA’s investors reactions to WikiLeaks; however it still does not justify BofA’s performance compared to the KBW Bank Index.  Short term speculation made the stock price dip briefly; however, the almost instant recovery and 3% drop shows investor trust.

A huge problem that BofA faced in this situation was the pending, looming threat of having information leaked.  Investors can only assume that information that is worthy of being leaked is negative news, not to mention the lack of security that BofA has over its confidential information, considering BofA is a bank, with people’s money, credit and personal information on the line.  The initial effects of the stock is the short term.

Long term: Suppose WikiLeaks did expose BofA’s 5GB of information.  There is no doubt in my mind that the stock would fall substantially.  No investor likes investing in a company which is being portrayed as a villain.  The major long-term effect of WikiLeaks on a company is the effect the leak has on the trust of the investor.  If the investor feels lied to or kept away from information, the stock will most likely be dumped and the stock price will fall.   In a nutshell, the stock price will affect the company-investor relationship.  If the investor is being exposed to  information they were not intended to see and the reaction is negative, the value in the company will suffer.

On the other hand, having company information being leaked may be unwanted but may also create PR opportunities for a company such as BofA.  The forced transparency of the leaks will allow BofA to address their stakeholders’ issues of concern.  BofA would be able to rebuild their image on trust and develop initiatives which promote corporate transparency and 2-way communication with stakeholders.

Regardless if WikiLeaks has, had, will have, or will leak information on BofA or any bank for that matter; companies and banks should become more transparent and trustworthy to ensure their investors trust, in the event that information is leaked.  Companies need to reach out to their stakeholders, tell them what they need to know before WikiLeaks does, and start a dialog with stakeholders before leaked information has the opportunity to damage reputations.  If information is leaked, a crisis plan needs to be prepared and executed.  The key to reduce the damages brought forth by leaked information is by being honest.   Stakeholder trust in a company = stakeholders trust in the stock.  A company with nothing to hide is not afraid of WikiLeaks.

Toyota Case Study

Skyping with Jeff Morgan, President and CEO of NIRI

Today I had the pleasure of listening to Jeff Morgan, president and CEO of the National Investor Relations Institute, via Skype in IR class (#irclass), discuss the objectives of NIRI, investor relations as a practice, and the constant regulation changes.  The presentation was indeed one to take note of for aspiring IR professionals as well as established professionals, especially those engaged in social media.  Although the presentation’s mention of social media was limited,  I immediately bridged connections between what the four purposes of NIRI are and their social media opportunities.   Without regurgitating Jeff Morgan’s presentation, the four main take-away points as to what NIRI’s purpose are as follows:

  • Information
  • Education
  • Advocacy
  • Community/Networking

Information - Involves online resources, weekly/monthly newsletters, monthly magazines

Basically, any material that is relevant to members of NIRI or the IR community is sent out to IR professionals.  Social media, especially Twitter, has been serving the IR community some solid information that is current and relevant.  On the Twitter platform, there has been a push for more real-time information, which has been gaining popularity in annual meetings, and hopefully will soon become a trend in all aspects of company information for all companies.  The reason social media has such a presence in company information, and also for NIRI is because NIRI serves as a guide for IR professionals and social media is one of the fastest ways to get information to a specific audience.  By posting information on social media, not only can an audience access it easily,  but they can also “retweet” it, blog about it, repost it, and so on and so forth.

Education - Involves webinars, conferences, etc. that pertain to a better understanding of investor relations

Because there is no particular “IR” concentration,  Jeff Morgan pointed out that most IR professionals come from finance/accounting backgrounds or, on the other end of the spectrum, public relations backgrounds.  Regardless of what background an individual comes from, there is always the opportunity to learn more.  NIRI provides IR professionals with opportunities to recieve additional information and education regarding accounting, communication, SEC filings and requirements, and capital markets.  As someone who has attended a NIRI conference, I can attest that NIRI provides up to date education for the IR professional in a constantly evolving practice.  The specific conference I attended was “IR and Twitter” which served as an informational session as to the benefits of Twitter and social media.  Also,  I have been noticing on Twitter as well as other social media platforms that informational webinars are becoming more and more popular for IR folks to receive up to date information on changing SEC regulations, as well as pointers and tips for IR departments.  If IR departments are not being educated by viewing new and social media, they are getting educated about new and social media.

Advocacy - Involves raising IR profile within companies, encouraging peer IR societies globally, and becoming involved with regulators such as the SEC and FASB

IR professionals constantly strive to meet SEC requirements, and continue to build/maintain a branded image in the eyes of their investors.  Although I feel as though I am starting to sound like a broken record, My opinion is that the opportunity for IR professionals to reach their specific audiences regarding these matters on social media is huge.  Secondly, regulators such as the SEC enforce legislation that the people of the United States ultimately suggest.  That being said, it makes sense for IR pros to become connected to “the people” via social media.  Also, it makes perfect sense for IR departments to utilize all aspects of social and new media for disclosures in order to reach a broader audience (blogs, Twitter, conference calls, etc, etc.).

Community/Networking – Involves networking with other IR professionals, key IR influencers and opinion leaders

What’s the most effective way to network with the IR community?  You probably already guessed it! Social media!  Sites like Twitter encourage discourse and the latest trends in the business.  Go ahead and search the hash tag #irchat in Twitter and see what all the IR folks are up to.  Sites like LinkedIN provide opportunities for professionals to connect on a more professional level, more or less like a digital business card of all your peers in the industry.

Please, Take off Your Internet Mask at the Investor Table

Thoughts on Anonymity and Social Media:

From my experience on the internet, a vast majority of the big talkers online hide behind a facade, avatar, pseudonym, or maybe even an old Halloween mask (resources permitting).  As a college runner, I have witnessed anonymous comments on athletic sites making bogus claims regarding times and records.  When I watch Youtube videos, I read profane and unnecessary comments about the videos.  When I ventured to see what Chatroulette was for the first and last time,  I witnessed almost complete anonymity and wanted complete separation from that service.  In these aspects of the internet that I have experienced, the anonymous nature of each challenges their validity.  Instead of posting intriguing and constructive comments on videos, hateful and irrelevant comments plague Youtube.  Lies are posted under false names, and people pervert innovative web services.

So here’s my problem statement: “When people have the opportunity to be anyone and get away with it,  they’ll do anything they want regardless of the consequences.”  There is really no validity with in these social/new media services because of the anonymity.  Even if a person must “register” first, who says they are not using a fake email and name to hide themselves?  If someone’s identity was verified before they decided to post a comment,  I would wager a sweet penny that 95% percent of the identity fraud  that occurs on social media would be eliminated.

Implications for Investor Relations:

I read this NY Times article and was inspired to poke around possible solutions for news sites that may actually contain material which stock prices are affected by.  If anyone can log into a legitimate news site and make false claims about a company, there will definitely be valuation consequences.  Although I am aware that it is a duty of every in-house IR and PR agency to monitor what is being said about their companies, there is the possibility for the anonymous internet hoodlums to post again and again.

Solutions?

The only solution I can offer would be to require a legitimate email address and full name; however most sites do this already and I still see the same number of “junk comments.”  Twitter has started to “verify” accounts to prove their legitimacy and Chat-Roulette is exploring the option of Veri-Face scanning to prevent from objectionable content being displayed.  But what about the Yahoo Finance boards? Should we even attempt cleaning out that mess?  Because the Yahoo Finance message boards seem polluted with garbage comments and inaccurate facts,  I suppose the only way to find posts that are actually valid would be to find the few that don’t read like a 3rd grader wrote them in crayon.  Maybe a little further down the road Yahoo Finance or any other business site can toss in their pennies and pitch in for a solution like Chat-Roulette in looking into.  The less misinformed comments on the web mean less of a headache for IR departments.  We’ll see what kind of internet security the future brings for investor relations.

In the mean time,  I’d love to hear possible solutions for IR departments and news sites regarding “false news” on the web.

The Frequency of New Media in Investor Relations

After reading an article today regarding stakeholder relations and social media, I was actually surprised at the amount of IR departments, institutional investors, and companies that have taken part in this “new media” world. To quote the article:

  • 85 percent of financial services professionals under 50 are utilizing social media (LederMark Communications)
  • 58 percent of institutional investors and sell-side analysts in the US and Europe believe new media will become more important in helping them make investment decisions (Brunswick Group)
  • 35 percent of Fortune 500 companies have a Twitter account (The Center for Marketing Research at the University of Massachusetts Dartmouth)
  • 79 percent of the top 100 companies in the Fortune Global 500 index are using at least one of the most popular social media platforms: Twitter, Facebook, YouTube or their own corporate blogs (Burson-Marsteller Fortune Global 100 Social Media Study)
  • (information collected by Lisa Davis, via MarketWireBlog.com)

It was always an assumption that by using social and new media, companies could pull ahead of their peers and build stronger relationships with their stakeholders.  Based on the figures, it seems as though using social and new media is now becoming a standard in virtually all industries in efforts to build/strengthen stakeholder relationships.

New media is unique in the sense that it provides companies, IR departments, etc with one location in which multiple audiences can be accessed.  Investors, consumers, critics, etc are available within a 3rd party platform which encourages all types of conversation, communication and dialog with the company/IR department/etc.  The fact that more and more companies and IR departments are using social media to communicate with stakeholders also points out that it is effective.  Many key influencers are located within the social media realm and therefore should be accessed.  It doesn’t take much observation  to realize that social media is bubbling with opinions.  It is in the best interest of any company to log on to social media sites and monitor what is being said.

At first social media seemed like a legal mine field for many companies regarding disclosure.  Any wrong move could result in an easily avoidable crisis.  How would companies avoid a legal crisis concerning new media? Answer: to not take part.  The companies that did take part experienced success, but only with caution.  The legality regarding social media and disclosures creates a fine line of compliance.  Now that an overwhelming majority of top corporations are utilizing social and new media, a new standard is being made for stakeholder communication.  To miss out could mean missed relationships with the investment community.

Investors @Youtube ???

I’m not sure why I have been overlooking one of my personal favorite new media platforms that has the potential to play a significant role in investor relations.  I accessed the Youtube website and searched for “investor relations.”  An overwhelming majority of the videos that popped up in the search results were case studies and clips from various IR award presentations.

However, the Tupperware corporation did an investor relations video, which featured its CEO, Rick Goings.  In fact, after clicking on the first video that yielded from my “investor relations” search, I found several other IR videos from Tupperware Brands.  It seems to me that Tupperware takes the cake on being well represented to the IR community on Youtube.  Granted, an intelligent investor is not looking on Youtube to gain primary research about stock and companies; however, sometimes it is nice to have a little “eye candy” to watch and listen to (especially if the CEO makes himself visible and talks about the company’s strategy and forecasts, cough company transparency cough).  Although, perhaps Tupperware’s significant IR presence on Youtube is only to make up for the fact that there is no direct link for their investor relations website from Tupperware.com…tisk tisk.

The only other company that has made a long-standing impression on me via Youtube is Coca-Cola.  Some of my observations can be viewed in a previous blog that I worked on for a corporate public relations course.

In conclusion,  Youtube, in my opinion is a great way for IR departments to give investors visual presentations regarding company information.  Although this is one-way communication (two-way if you consider video comments from the audience) Youtube is easy, free, and people are crazed over it.  In Tupperware’s case, Youtube gives investors a chance to hear the CEO speak about the company and the future, which provides company transparency and gives potential investors confidence.

If companies do not have any material on Youtube regarding IR, annuals, or special announcements, I suggest they invest in some video production, or else the only way the Youtube community’s investors will hear about them is if their IR department wins an award or becomes a case study.

How Can a CEO Measure IR Results?

Let’s be real. You cannot put a dollar sign on the results yielding from an IR effort.  This is because IR is not a basic business procedure like accounting or marketing.  IR isn’t about crunching numbers to maximize profits or coming up with persuasive advertising to sell products for record-breaking figures.  IR is about achieving valuation and brand management/reputation through relationships with investors.  If management asks for monetary results from IR, it’s like a homeowner asking for money because his house is the nicest in his neighborhood.  The nice house needs to be maintained to keep its value.  Companies need IR to maintain company worth in the eyes of the public.

So where does social media fit in? Let’s think of some basic functions of corporate social media: communication, relationships, and customer service.  Put these three functions together and you’ll come up with a strategy for reputation management and effective corporate branding.  If a CEO or any other top-tier management position wishes to see how social media benefits a company’s investor relations department, they ought to look at the amount of communication that takes place in the social media realm, between investors/consumers and their company.  Relationships between publics and companies cannot be measured quantitatively, and therefore IR social media can only be measured in terms of volume, quality, and feedback from investors.

Although investor relations isn’t a “bread maker” function for companies (compared to marketing, sales, etc) it is equally as important.  IR creates relationships and trust between investors and companies which is necessary for long-term investors, company growth, and profits.  If investors have trust/faith within a company, they will be more inclined to engage in that company both socially and financially.  Social media presents the perfect opportunity not only to create relationships and the trust of their investors through communication, but also to monitor what is being said about the company for brand preservation and reputation management.

Recently,  I attended a NIRI panel discussion which focused on the benefits of IR departments using Twitter. Dennis Walsh, a Senior Investor Relations practitioner at Sharon Merrill Associates said plain and simple “Social media is here to stay.”  Social media creates an interesting opportunity for IR professionals.  To those who are not involved yet, you better jump on the train and start engaging, or at least start seeing what is/has been said about your brand.  Next time the CEO asks what’s being said about the brand, I’m sure you’ll have a whole slew of online chit chat to bring up.