Google+, Investor Relations and Lawyers’ Panic Attacks

On July 14, as Google led listeners through its second-quarter 2011 financial results, CEO Larry Page took to multitasking.

As he spoke on the call, Page offered some of the same information to his Google+ followers.

And why not? He had a lot to crow about. Google’s reported revenues had increased 32% over Q2 2010. Aggregate paid clicks were up 18%, and average cost per click increased by 12%.

Just one thing though—what about Fair Disclosure? The U.S. Securities and Exchange Commission’s Regulation FD prohibits selective disclosure of information by publicly traded companies. Google+, like any social network, is nothing but selective about the sharing of information among followers. Google+, with its Circles feature, which restricts the flow of information to handpicked followers, enables the user to be more exclusive with messages than Facebook and Twitter.

The SEC had offered guidance in 2008 about the use of Web sites in relation to Regulation FD, and mentioned some conditions that had to be met when releasing information for investors on Web sites; namely, that the information needs to be widely accessible and be available in a known channel besides the site.

This guidance predates the ubiquity of social networks. During its earnings call, Google was, consciously or not, potentially pushing the limits of Fair Disclosure.

The question for investor relations pros is, was it safe for Google to share information with investors in the closed community of Google+—or on any social network?

Jeff Morgan, CEO of the National Investor Relations Institute, says this is a case of a high tech company once again redefining boundaries and, more important, showing other companies how to take control of its messages.

“At this point high tech companies are sort of blazing the trail. What you’re seeing is a lot of companies—particularly in high tech space—showing how we can use social media channels,” says Morgan. “It is not an FD problem. You’re listening to an earnings call but also getting tweets about it, for instance. But I think what’s important is for companies to take advantage of using a bigger microphone. Send that info to all those channels. All of this is a positive way to multipurpose your message.”

Morgan points out that this change has been evolutionary, not revolutionary. It’s just the next platform in a line of investor communications tools that began with hand-delivered messages.

“Google+ is not a widely available, known channel,” Morgan says. “But as long as a company has met the FD requirements elsewhere, there’s no harm. It’s the same information.”

Dominic Jones, founder of IR Web Report, says that while posting an earnings script on Google+ is something new, Page’s move was within the bounds of FD. “Regulation FD doesn’t come into this because the live earnings call complied with FD, and [Page] posted the script after he had already distributed the information on the call,” Jones says.

Nevertheless, using push technology like Facebook and Google+ to share information with investors does carry with it some risk.

There are ways that companies and their executives could use Google+ and other social media and be in compliance with Reg FD,” Jones says. “However, they have to think it through beforehand. It’s not hard, but most lawyers will have a panic attack if you even mention [social media]. That’s because they don’t understand how the technology works. Tech people need to work with legal, IR and executives to find the right technical solutions. The legal framework has been outlined clearly by the SEC and it’s not a high hurdle, but lawyers don’t understand the tech and geeks don’t understand the law.”

Legal aspects aside, some shareholders might feel left out if a CEO is blasting away on Google+ during an earnings call and they’re not part of that particular Circle and can’t comment. This can create some sticky situations for investor relations professionals.

“Where all external audiences are supposed to be treated the same, how will IR departments create their Circles?” says Jones.

Start drafting those conciliatory e-mails now.

—Steve Goldstein




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