While corporate directors and executives recognize the value and potential impact of social media, many are not sufficiently utilizing nor monitoring the medium and information gleaned from it within their corporate strategies or risk mitigation practices, finds a new study conducted by The Conference Board and the Rock Center for Corporate Governance at Stanford University. The report, “What Do Corporate Directors and Senior Managers Know about Social Media?,” emphasizes the value of utilizing social media to evaluate corporate performance and risk management.
Directors reported an absence of social media discussions in the boardroom—only 6.6 percent of directors said their board has a committee with responsibility for overseeing social media, and only 7.7 percent said their board receives reports with summary information and metrics on social media strategy success—only slightly higher than the 6.6 percent that was unsure whether their board received this information at all.
This absence of information was due to the fact that their company did not collect it (46.5 percent) or that it is considered “too low-level” for the board, at 31.8 percent of the 184 CEOs, senior executives and independent directors surveyed between May and June 2012.
“They are interested in this only at the highest level of knowledge, but not actively participating in the development for the company,” said David F. Larcker, a co-author of the study and James Irvin Miller Professor of Accounting at Stanford University. “Reviewing detailed information from social media aggregation providers might encroach too closely on management’s role.”
If boards were to ask for more of this information, Larcker notes that a good place to start is with a discussion with management on their social media strategy and capability. Directors should question if conversations involving customers, employees or suppliers are being monitored, if overall sentiment on products and services, discussion themes and mentions are being measured, for both the company and its competitors. “The choice of metrics will depend on the company strategy and the willingness of the board to consider the new metrics available from analyzing social media data,” Larcker said.
“Obviously, the super granular statistics on social media activity should not be provided to the board. However, a thoughtful and careful summary of the fundamental trends and indicators are highly relevant to board decision making,” he said.
Approximately two-thirds of executives and directors reported using social media for personal purposes, at 65.2 percent, and 62.5 percent said they used social media for business purposes.
“As you might expect, executives that use and understand social media for their personal use tend to also use social media for business purposes,” said Lacker. “However, this association is far from 100 percent overlap. Most executives tend to be spectators that read and monitor what goes on, but are not creators that develop blogs and publish updates on a regular basis.”
As younger generations come into the C-suite and boardroom, Larcker noted, we can anticipate more overlap between personal and business intentions in social media.
Seventy-five percent of respondents’ companies did not have formal social media participation guidelines or policies for board members, while 10.3 were unaware of policies and 14.7 percent knew of policies at their companies. Some companies may be wary of director and executive participation on social networks because of Reg FD concerns, which would require any privileged information disseminated to a small population (e.g. through social media) to be released in an 8-K filing as immediately as possible.
The study recommended some action steps for companies to maximize their social media utility:
- Assess current capabilities
- Determine how social media fits within company strategy and business model
- Map company’s key performance indicators and risk factors to information available through social media
- Implement a “listening” system to capture data
- Develop formal policies and guidelines for employees, executives and directors
- Consider the legal and behavioral ramifications
“The success and failure of a company’s strategic initiatives will be reflected in the dialogue that occurs in the social media space,” Larcker emphasized.