SEC Gives A Thumbs Up For Corporate Announcements via Social Media

By Michele Weisman The Securities Exchange Commission (SEC) announced Tuesday that public companies and their executives can legally use social networks like Facebook, Twitter, and LinkedIn as a way of communicating corporate information. The debate was sparked by a case involving Netflix's CEO Reed Hastings. In July 2012, Hastings caused an uproar when he used his personal Facebook page to announce that Netflix had exceeded one billion hours of streaming for the first time. Consequently, this caused Netflix's stock price to rise. This type of news is typically disclosed via traditional channels like a SEC filing or press release. The question became:  had Hastings violated fair disclosure rules?

In December, the SEC was considering to begin an investigation on Hastings. Yesterday, the SEC decided not to press charges. The SEC declared that public companies could treat social media as legitimate and approved outlets for communication, similar to its corporate website or Edgar filing.  In addition, the SEC requires corporations to disclose which social networks will serve as outlets for company announcements.

The SEC is giving stifled corporations the "thumbs up" to build direct and close relationships with their consumers. Transparency is no longer a choice. In the age of social media, consumers have higher standards for honesty and corporate transparency than ever before. Customers have the expectation for companies to be open and real--those that aren't will surely lose out.

It's more crucial than over before to have the “top dogs” of  your organization active and engaged on social media. This can be a huge asset to your company and set the tone of company culture. In order to instill a consistent social media strategy across the organization, C-Level executives should lead by example and participate in the conversations around their brand.

Will public companies and C-Level executives take advantage of announcing news via social media?