Social media reshape disclosure

Social media are changing the way companies handle investor relations and corporate disclosure, offering the potential for more transparency, but also raising questions about legal compliance.

When Ebay released fourth-quarter results in January, its chief blogger, Richard Brewer-Hay, listened in on the earnings call and posted live updates to the micro-blogging site Twitter.

"This is Ebay's first negative year-over-year quarter," he wrote. "We're not happy about that."

Mr Brewer-Hay said "live-tweeting" his company's earnings call was a way to reach investors and members of the Ebay community who would not otherwise be able to join the call. "I'm getting it to a new audience," he said.

Other companies are also turning to social media to enhance their corporate communications strategies. Computer maker Dell has an investor relations blog called Dell Shares. Intel, the chipmaker, will allow live voting via the internet at its annual meeting in May.

But as more corporate information is shared through blogs and services such as Facebook and Twitter, the drive for transparency can collide with laws that regulate financial disclosures. Dell's vice-president of investor relations, Lynn A. Tyson, said she was initially reluctant to start Dell Shares. "One of the challenges on the blogosphere is disclosure," she said. "How do you comply with all the disclosure requirements in an environment that could potentially create more risk?"

Another risk is that someone communicating by blog or through Twitter might end up affecting the company's share price by focusing on positive information or jumping ahead during the call. Mr Brewer-Hay has worked with Ebay's legal department to craft a set of disclosures that should protect the company from any liability.

Now before Mr Brewer-Hay "tweets" earnings, he will post a four-part legal disclosure to Twitter in 140-character bursts. One tweet reads: "The presentation of this financial information is not intended to be considered in isolation or as a substitute for GAAP financial measures."

While social media remain new territory for most companies, especially when it comes to investor relations, there are signs that regulators are willing to embrace new methods of communication.

Last year, the US Securities and Exchange Commission began recognising the disclosure of certain types of material information through company blogs.

Brian Solis, who runs the blog PR2.0, said: "If the people doing social media for a company aren't informed enough to do the right thing when using these tools, you're in danger."