;)
There was a time when the disgruntled small shareholder had little recourse except to create an unpleasant scene at the company meeting. Today, the Internet— and particularly social media—has joined activists with common interests and agendas in a global network that can directly divert the course of mighty corporations. Consider:
Richard S. Levick
- Activists have used social media to compel CEOs to resign, as we saw a few years ago when Eric Jackson—a blogger with 96 shares and about eight readers a day—struck a chord with a high-authority blog he created to air grievances about Yahoo’s business performance. Small investors, representing around 2.6 million shares, responded warmly. Six days after a contentious board meeting, Chief Executive Terry Semel stepped down.
- Activists are using social media to influence mergers and acquisitions, as we saw when shareholders in On2 Technologies used a venue called Moxy Vote to consolidate their ranks and expedite voting, ultimately forcing Google to increase its bid for the company by 25 percent.
- Carl Icahn used Web-based resources to attempt to overthrow the board of Lionsgate in an acquisition bid. The bid failed, but Icahn proved that social media isn’t just for the little guy, and that a proxy fight once requiring months of preparation and shareholder outreach could be waged in a matter of days and at minimal expense.
- Facebook and Twitter are reliably potent rallying tools, but other sites now provide sundry investors with effective forums. Seeking Alpha, StockTwits and Wikinvest allow investors to discuss valuation and investment potential. Family Bhive calls itself the “Facebook for the Fortunate” and provides proprietary social networks catering only to the wealthiest investors.
Not surprisingly, activist shareholders with social and political agendas take quite comfortably to social media. Here too, new sites offer tailored venues for such agendas. For example, the aforementioned Moxy Vote provides investors with proxy recommendations from a variety of interested groups, including the Humane Society of the United States and the International Brotherhood of Teamsters.
The additionally compelling significance of such campaigns is that they don’t just organize activist shareholders; they create activist shareholders on multiple fronts.
Directors of public companies must ensure that a response strategy is in place or risk ceding control of their destinies. Social media must be comprehensively monitored. Appropriate responses and possibly proactive communications must occur in the same space where their potential adversaries now live.
Yet, as recently as 2009, studies found that only three percent of U.S. large companies use social media as part of their IR communications. To be sure, corporations tread a minefield here that the activists don’t. Mistakes in the social media can damage brands. They can generate lawsuits. The wrong message on Twitter can reverberate throughout the world—an expensive if not fateful 140 characters. And disclosure issues loom large over all facets of outreach. That said, corporations are doing enough positive things in social media to encourage similarly innovative thinking.
For example, Alcoa’s Facebook page has nearly 14,000 followers and a Twitter account linked to earnings releases and investor webcasts. eBay tweets updates on earnings calls and analyst meetings. Amgen uses the Web to survey shareholders about executive pay. Intel has interactive Q&As that allow shareholders to vote online during its annual meeting.
Officers and directors have an opportunity to do more than simply think up creative, catchy social media deliverables. More than such one-offs are needed. Their companies must attack this field with vision and strategy. They must recruit and deploy teams of digital communicators. They must develop formal policies and procedures that define what can and cannot be done in every social media venue. They must think of financial communications, with all its requirements and regulations, as brand communications and engage the web appropriately.
In the final analysis, it will only reassure shareholders when they see the directors of the companies they own living in the same world they do.
Richard S. Levick, Esq., is the president and chief executive officer of Levick Strategic Communications. Reach him at rlevick@levick.com.
There may well be some logic to executives and directors taking to the social media venue for communication. But, ultimately, in regard to issues surrounding activist investor action I believe that this misses the larger issue. If directors in public companies learn to bring the same mindset and action for performance and value maximiation to the boardroom that activists do, then there will be nothing of interest in their companies for activists to pursue. At least as a general rule, this is decidedly not the case and remains absent from much of the abundance of dialogue regarding corporate governance.