Corporate Governance: Who's Afraid Of Facebook And Twitter?

Frightened of Facebook? Torked off by Twitter? You’re not alone. Corporate secretaries, public company board members and in-house counsel are notoriously reluctant to make use of social media and technology in general.
From where you’re sitting, territory as uncharted as the web likely seems best left to your company’s marketing department. And several events that have taken place in the investor arena in recent weeks seem to validate your fears.
The most publicized of the boardroom news stories is undoubtedly the situation at NASDAQ, where – for more than a year – hackers have reportedly been breaking into the web-based service the company uses to communicate with board members between meetings. Commentators speculate the culprits targeted that particular service, called Directors Desk, in the hope of finding insider information for illegal trading purposes.
And many corporate secretaries’ nightmares were realised late last month at Microsoft when the tech giant’s earnings were inadvertently disclosed to the public more than an hour before the company’s officers planned to release them. High-speed internet search technology picked up Microsoft’s Q2 earnings release, which had been placed on a URL (or web address) that the company believed to be secret. It was then publicized on StockTwits (that’s basically Twitter for investors).
All this might seem like enough to make a corporate secretary pull the plug on his or her computer. But you shouldn’t.
‘Ultimately, it’s still a mistake and – as people get more and more used to the technology – it’s not likely to happen a lot,’ securities lawyer Vanessa Schoenthaler says of the Microsoft debacle. A managing partner in her firm’s New York office, Schoenthaler says corporate officers responsible for inadvertent disclosures like the one Microsoft suffered wouldn’t be in violation of Regulation Fair Dislcosure.
‘Reg FD wouldn’t apply because the company’s not intentionally giving anyone material non-public information,’ she explains. ‘The company could try to sue whoever uses this stuff as a preventative measure, to discourage anyone from doing this sort of thing but, ultimately, you’re talking about, what, an hour before the company releases earnings on its own?’
What does all this mean? That directors and officers shouldn’t be thinking twice about whether to use the web, but about how to use it.

Watch for the March issue of Corporate Secretary, where deputy editor Aarti Maharaj covers governance professionals’ use of social media.

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