Social Media Board Strategy
The internet connected the world & social media websites closed the gap of receiving delayed information. Social Media websites, such as Facebook, LinkedIn, Twitter, & others allow users to communicate & share information instantaneously via instant messages without skipping a beat. When it comes to corporate governance of social media, according to PwC, the global adoption of this phenomenon has a direct impact to your organization as employee, customers, investors, and stakeholders participate in social communities…directors are faced with sorting out how social media impacts the firms that they oversee and their own roles on boards.
Martin Coyne, lead independent director at Akamai Technologies (AKAM), “All CEOs and their boards need to know the basics of social media. This includes how social media can impact their companies and also how they can proactively use social media as part of their business strategy.”
Investors believe that the boardroom has been unfortunately slow to understand the changing landscape and incorporate social media in strategic planning. David Larcker of the Stanford Graduate School of Business informs that only “21.7% of board members have a very good understanding of the impact that social media can have on your company. This is a not a great number …a $12 Billion move in Apple stock seems to have started with Tweets (Twitter messages) from a single anonymous source in China.”
In this article, I will provide recommendations for board members incorporating social media into strategy and present a new governance model, titled “The Observant Governance Model” in compliance with Regulation Fair Disclosure (Reg FD).
Board & Management
In a recent McKinsey report, firms that embrace Web 2.0 (social technologies) and social media are more likely to be market leaders, have their market share increase, and use management practices that lead to higher margins. Management wants social media to be a new viable revenue stream & a future cash cow. In the world of Twitter; Microsoft, Porche & Sharpie all have run successful campaigns in attracting new customers or followers to their brands. Virgin America, increased brand awareness by running special advertising campaigns and raised $50,000 in charitable donations for Stand Up To Cancer. It was also one of the top five sale days ever for the airline.
Lucy P. Marcus, board director & expert on corporate governance, the big elephant in the room is social media. When she did a quick search for directors on Twitter or LinkedIn with their company name, or their own name and they realized that there is a whole conversation going on that they know nothing about. In some cases it left them somewhat shell-shocked. This is not surprising, as in PwC’s last year annual corporate director’s survey, social media is a topic that’s particularly challenging. Less than 2% describe themselves as “very engaged” in overseeing or understanding employee social media training and policies.
The Regulators
Catherine Bromilow, a partner in PwC’s Center for Board Governance speaking with Richard Levick, President & CEO of Levick informs, “we haven’t seen much yet from regulators such as the SEC, FTC, or FDA in terms of concrete guidance as to what is constitutes appropriate social media usage in the investor relations realm or in industries where marketing and communications are tightly controlled, such as pharmaceuticals.” Government regulators monitor what management can and can-not publicly say about their companies, competition and products. Brokers can’t solicit clients by promising outrages returns.
What are board members to do?
Ray Pellecchia, former communications VP of the NYSE Euronext describes “directors should at least monitor social media so as to get a different perspective on a company’s reputation & brand.
Incorporating Social media into Strategy
1. For starters, the board could ask management to prepare a presentation for them about the company’s social media policies & procedures, marketing campaigns & budget allocated.
2. Inquire about country specific-targeting such as in China, Brazil & India using social media tools.
3. The board also needs to fill missing technology gaps on its ranks by adding more IT savvy folks.
Martin Coyne (AKAM) believes, “the impact of social media should be routinely incorporated into strategy discussions. Boards should ask the question: How do we harness the power of social media offensively and defensively? CEOs and directors need to learn continuously and make sure they have access to expertise to make the right social media decisions.”
Lucy Marcus believes, “not every business needs a board director who is an expert in social media, but every board should ensure that new directors they bring onto the board have an understanding and fluency with social media. It should be a baseline skill they bring to the table.”
The Observant Governance Model
· As companies have Twitter / Facebook accounts, create an account in compliance with Reg FD which will communicate on behalf of the board.
· The account can tweet dates of upcoming investor calls, annual meetings & speaking engagements of board members.
· The committee can periodically report back to the board issues needing their attention.
The accounts should be monitored by a committee compromising of the Corporate Sectary, Investor Relations, legal team, HR & Public Relations. Your current employees that monitor social media for reputational risk can share expertise in bridging the learning curve.
According to PwC, Engage. From a personal learning perspective, it's difficult to understand the power of an experiential medium without experiencing it. The benefits of experimenting it as a communications tool will outweigh negative connotations. It may seem a farfetched idea but not so long ago, delivering live 24 hour news CNN & the IPAD were thought as farfetched ideas. Social media offers wealth of opportunities & tons of pitfalls, but not venturing or experimenting as an early adopter gives advantages to your competition.
About Yusuf Azizullah
Yusuf Azizullah @yusuf_11 CEO, is founder of Global Board Advisors Corp (GBAC), a board advisory firm. He previously advised global 50 Financial Institutions, Healthcare & Media companies in leadership roles on Sarbanes Oxley, Dodd Frank implementation, transitioning to International Financial Reporting Standards (IFRS) from US GAAP & Risk management. Yusuf teaches adjunct courses; Strategic Management & Global Strategy at the University of Maryland’s Smith School of Business.
Yusuf was honored by The National Association of Corporate Directors (NACD) as a “Top Corporate Governance” leader in 2012 for his social media presence on Twitter @Yusuf_11. He is a member of the Financial Executives International (FEI) association, provided editing comments to the “COSO” governance framework used by a majority of the public firms listed on NYSE & NASDAQ in determining Internal Controls over Financial Reporting (ICFR). Yusuf completed Executive Education from the Harvard Business School with a career track in corporate governance programs focusing on boards of public companies for Audit Committees in a new era of governance.
Email: Yusuf11@gmail.com
Works Cited in Social Media Paper
2) Moxy vote, http://www.forbes.com/sites/richardlevick/2012/03/19/johnson-johnson-joins-the-shareholder-revolution/
3) Moxy vote closing http://www.bizjournals.com/philadelphia/print-edition/2012/07/20/done-in-by-regulatory-stumbling.html?page=all
4) Benjamin S Fischer,http://www.forbes.com/sites/insider/2013/01/16/its-time-for-the-sec-to-join-the-digital-age-why-the-secs-attempted-crackdown-on-the-use-of-social-media-is-misguided/
5) PWC Paper http://www.pwc.com/en_CA/ca/directorconnect/publications/pwc-social-media-new-reality-for-directors-2012-09-28-en.pdf
7) Twitter Case studies https://business.twitter.com/en/optimize/case-studies/
8) PwC 2012 survey http://www.pwc.com/en_US/us/corporate-governance/annual-corporate-directors-survey/assets/pdf/pwc-annual-corporate-directors-survey.pdf