Investor Relations Biggest Challenge in the World of Social Media

My parent’s always told me, be careful what you put on the internet, because once it’s on, it’s always on and will eventually be blown out of proportion.

So wouldn’t that be the case with investor relations and disclosures on social media sites?  Once something is posted online by a company, eventually the information is going to be perceived in infinite ways by billions of people, especially on social forums such as Twitter and Facebook.  Sure IROs can monitor information being said about companies; however, they have no ethical way of controlling what people say (unless companies go to the extremes of deleting bad comments that consumers and investors leave on company sites).

This is one of the very reasons companies use 3rd party social media sites to disclose information and encourage honest feedback without investors and consumers being turned off to the idea of communicating on forums that companies have control over.  Although this creates honest 2-way communication, IROs now have no control over the information flow about a company once information is disclosed on the internet.  IROs were considered “media gatekeepers” of company information, an maybe still are; however, sites like social media platforms have almost totally bypassed IROs’ control.  Once something is released on heavy traffic forums, there is no going back.  Investors take in the material that IROs give to them, but you better believe that they are aware and participating in other forms of discourse that investor relations departments have no control over.

In order to fully understand the challenge that social media presents investor relations, we must understand the purpose of investor relations regarding disclosure of information to the public.  Investor relations is communications between corporations and the public/investors regarding business decisions, progress, and results.  In conjunction with this goal, investor relations also serves as image building to promote the company. So, one could look at an investor relations practitioner as an information gatekeeper, deciding which information to provide the public with (in regulation with Reg. FD, Securities Act of ’33, Securities Exchange Act of ’34, etc).  Once information is released to social media sites, investor relations practitioners’ hands are tied and have no control over the discourse that will follow.  They are strictly limited to answering queries honestly and perhaps (if needed) play damage control.

Another challenge is the potential for rumors online about a company.  Sure, a company can make an official release or disclosure attempting to quiet malice rumors or silence untrue claims about the company by online blabbers, but anyone that has been a victim of a rumor knows how hard it is to clear up a rumor 100%.  This is a challenge that an IRO wouldn’t suspect to be in the job description, and to be honest, I was hoping that rumors died in high school…guess not.

Like my parents warned, once something is posted online, people will twist it and take it for something that it’s not.  Things don’t seem to change, even in the corporate world.  Once something is online, investor relations practitioners lose control of the information flow, especially on 3rd party social media sites where people engage in discourse more openly and honestly without corporate oversight.