Web Disclosure: The Ongoing IR Dilemma

Neil Hershberg, SVP of Global Media for Business Wire wrote an interesting op-ed in Bulldog Reporter’s IR Alert contending that web-based disclosure “still isn't ready for prime time.”

He cites a number of reasons why — one year after the SEC’s Interpretive Guidance Release — investor relations professionals are no further along when it comes to using Web 2.0 as a channel for the release of important information to investors.

Certainly, one key reason for the inertia was the horrendous financial meltdown, which began in 2007 and accelerated in 3008. In the face of chaos, Hershberg asserts, investors (and IR professionals) clung closely to what they believed to be “the global gold standard” of disclosure.

While I would agree that blogs, bulletin boards, Tweets and RSS feeds are no substitute for the traditional broad, simultaneous release of official information, they can undoubtedly be an extremely useful adjunct. As the aggregate number of analysts declines — and the number of investors using the social media rises — it’s good for the investor relations community to be prepared for an inevitable sea change in material disclosure.

A Global Crisis of Confidence in US Financial Markets

There’s a comprehensive and fascinating article in the January 3 issue of The New York Times that should be must-reading for all public relations (PR) and investor relations (IR) consultants who serve financial services companies, including private equity firms and commercial and investment banks. “The End of the Financial World as We Know It,” by Michael Lewis and David Einhorn, begins with a provocative statement: “Americans enter the New Year in a strange new role: financial lunatics. “

As proof of their thesis, authors cite “the strange story of Harry Markopolos,” a former investment officer who tried, for nine long years, starting in 1999, to explain to the SEC that Bernie Madoff, the man who engineered the biggest global Ponzi scheme ever, couldn’t be anything other than a fraud. In response, the SEC undertook a slapdash investigation of Madoff and pronounced him free of fraud.

The Madoff scandal is just one example of a systemic problem … and it’s not just a matter of insufficient oversight of the financial services industry.

According to Clusterstock, many of Madoff’s investors were well aware that his returns were impossibly good, so he had to be cheating. However, they never considered the possibility of a Ponzi scheme. They thought that the scam involved insider trading … and that’s precisely why they chose to invest with Madoff!

In many cases, the Wall Street swindler’s investors willfully chose to become complicit in their own defrauding by ignoring the old adage that “if it sounds too good to be true, it probably is. “

Is Nothing Private in Today’s High-Tech Environment? Apparently Not.

Crisis management, public relations, investor relations, financial communications and technology consultants, like those in our New York City PR firm, often talk about the ways in which the Internet has opened a window on private lives. There was a perfect example of this phenomenon this week on the Apple website, where Steve Jobs addressed a new flurry of rumors about his health.

In his open letter, Jobs wrote: “… my doctors think they have found the cause — a hormone imbalance that has been ‘robbing’ me of the proteins my body needs to be healthy. … The remedy for this nutritional problem is relatively simple and straightforward, and I’ve already begun treatment. … I will continue as Apple’s CEO during my recovery.”

In 2004, the media breathlessly followed Jobs’ successful battle against pancreatic cancer. In June 2008, his gaunt appearance gave rise to new speculation about his health. More questions were raised when Apple announced a few weeks ago that, for the first time ever, Jobs wasn’t planning to deliver the keynote address at Macworld.

While there are clear standards for disclosure of material financial information, disclosure concerning matters of health has typically been left to the discretion of the company’s board of directors. Not any more, apparently. According to Henry Blodget, co-founder, CEO and editor-in-chief of the Silicon Alley Insider, “Steve's health is NOT just a ‘private matter.’” He adds, “Steve Jobs is arguably Apple's single most valuable asset. If he's seriously ill, shareholders have every right to know this.”

Technorati Tags: makovsky, Crisis management, public relations, investor relations, technology, Internet, Steve Jobs, Apple, health focus, Silicon Alley Insider, financial communications, business, communications, public relations

Making the Most of Search Engine Marketing

New York-based Advertising Age recently released the 2008 edition of its Search Engine Marketing Fact Pack, an overview of the top search engines, keyword use and “everything else marketers need to know to connect with consumers.”

It’s filled with interesting data. For example, a recent survey of advertisers revealed that they were robbing Peter to pay Paul. When asking which budgets they were diverting to fund search marketing programs, “magazine advertising” was the number one answer, accounting for 32 percent of replies, followed by “website development” (22%) and “direct mail” (17%).

Also worth checking out in the Fact Pack are the industry-specific rankings of the top websites and search terms. Among the sectors addressed: business information, banking, stocks and shares, telecommunications and healthcare. … all valuable business intelligence for branding and marketing firms and public relations consultants.

The Role of Blogging in Financial Communications

For PR and IR professionals interested in the role of blogging and the social media in financial services, private equity, and investment banking communications, check out the article by Davis D. Janowski in InvestmentNews that addresses the conflicting views of blogging held by financial advisors, the Financial Industry Regulatory Authority (FIRA) and the Securities and Exchange Commission (SEC).

Financial advisors see their blogs as “a harmless, inexpensive technology” that facilitates communication with their clients. FIRA views blogs as ads that require supervisory review. And the SEC contends that blogs should be treated as a company statement.

The bottom line? To avoid compliance problems, be aware of what you are saying in your blog. Keep your communications general and avoid mentioning specific transactions, products or equities by name. For more information, check out these links:

• Certified Financial Planner Board of Standards’ recently updated Standards of Professional Conduct
• “FINRA Provides Guidance Regarding the Review and Supervision of Electronic Communications”

• The SEC’s “Commission Guidance on the Use of Company Web Sites”

Do Ethics Matter? Yes!

Our job as PR practitioners is to build connections and trust, so ethics ought to be top-of-mind for us at all times, whether we work for corporations or public relations/investor relations firms.

We’ve already experienced the consequences of ethical lapses on the corporate side. And once the U.S. Presidential Election really gets underway, I have every confidence that we will be subjected to the inevitable array of charges and countercharges that range from dubious to patently untrue.

Even small sins can lead to big evils, according to Stanford Professor of Psychology Philip Zimbardo, the author of The Lucifer Effect: Understanding How Good People Turn Evil. (Zimbardo is famous for creating the Stanford Prison Experiment, in which normal college students randomly selected to serve as “guards” in a simulated prison, became so brutal so quickly that the experiment had to be shut down after only six days.)

A speaker at this year’s TED conference in Monterey, CA, Zimbardo presented the “Seven Social Processes that Grease the Slippery Slope of Evil”. They include “blind obedience to authority,” “uncritical conformity to group norms” and “passive tolerance of evil through inaction or indifference.” Zimbardo concludes that we need to foster a culture of heroism as the antidote to evil.

In its list of professional values for our profession, PRSA lists “honesty” as the #2 value, after “advocacy.” I think “honesty” warrants a promotion to the #1 spot.

How Do You Count Your Cash?

Now, more than ever, we need to “think global and act local.” Despite the fact that the internet has made the world a smaller place, it hasn’t eradicated many of the more subtle cultural differences that separate us. For just one example, check out “How People Count Cash,” a nifty little video that shows how people all around the world have their own, unique ways of counting currency.

These subtle cultural differences can be critical if you’re doing business in an unfamiliar market. It’s one of the reasons why our firm has long cultivated a network of partner agencies, regionally, nationally and worldwide: IPREX , one of the world’s largest global public relations networks, and the Northeast Partnership, which consists of seven PR firms in New England (Connecticut, Massachusetts, Rhode Island, Vermont, Maine), New York and New Jersey.

It’s part of our commitment to “The Power of Specialized Thinking.” Not only have we organized our practice areas — health care + pharmaceutical, technology + business services, financial + professional services, investor relations, branding + visual communications and online fluency — to reflect our belief that depth of expertise always yields the best outcomes, but also because we’re convinced that geographic and cultural specialization are more productive and often more cost efficient for our clients.