Email Sales

Email Sales

Need product support? Please visit our Customer Support page.





Back to Blog

Corporate Use of Social Media on the Rise, but Not Without Caveats

Merrill Disclosure Solutions | June 30, 2014

Abstracted from: Using Social Media To Report Financial Results

Raqual Alexander - James Gentry

By: Prof. Raquel Meyer Alexander and Prof. James Gentry, Washington and Lee University (RMA); University of Kansas (JG) Business Horizons, Vol. 57, No. 2, Pgs. 161-167

More use of social media. Companies are increasing their use of social media for business and financial communications. Although originally viewed as an additional channel for communications with financial professionals and investors, social media has become an important and immediate way to communicate with interested parties. Those parties can also provide rapid feedback to the company and to other investors. Accounting professor Raquel Meyer Alexander and journalism professor James Gentry report that two-thirds of large companies participate in StockTwits; 77% of the Fortune 500 companies now have Twitter accounts; 70% appear on Facebook, with almost as many placing videos on YouTube. Other major social media platforms for companies are LinkedIn, SlideShare, Reddit, Pinterest, Instagram, and Google Plus, but Twitter leads the pack, both in numbers of companies and widespread use for investment purposes. In particular, this may be because it draws an older demographic than many other sites.

Rules apply to social media. The SEC includes social media in its rules on fair disclosure and specifically states that the individual accounts of corporate executives also fall under the aegis of Regulation Fair Disclosure (Reg. FD). Most personal social media activity by an executive, the authors warn, could violate Reg. FD. Remarks made by executives in response to other people's remarks on non-company-sponsored sites fall under the regulation. If an executive even clicks “like” for a remark made by someone else somewhere in cyberspace and if that remark in any way impacts the company's business, both the company and the executive can be liable. Although Reg. FD specifically applies to communications with financial professionals and investors, when one viewer of a site falls into either category, the communication is subject to the regulation. Social media communications, however brief or casual, should thus be considered formal communications that must follow SEC regulations and company guidelines.

Extremely effective if used well.  Used properly, social media can be a boon. Companies should develop social media strategies as part of their financial reporting and public relations strategies, the authors suggest. Social media communications should be synchronized and overseen by a single authority who coordinates the messages on all channels and changes them simultaneously. Companies with an effective social media presence have greater stock liquidity than those that do not, and less well known companies benefit disproportionately. In addition, the audience mood on these sites is an accurate predictor of upcoming market response. In the event of bad news, immediate response (including apologies, if necessary) can help turn public opinion in favor of the company. Failing to use social media well, however, can make matters worse.

Communications must be planned and monitored. While social media can add significantly to public relations and build positive sentiment, these communications should be taken as seriously as other forms of disclosure. Using social media will increase staffing needs and legal costs. Companies need to create clear responsibility for controlling social media content in tandem with other communications and reporting channels, and establish who has authority to issue social media communications, who reviews them for compliance, and how they coordinate with other communications. Since off-hand remarks by top executives can be interpreted as representing company conditions, it may be advisable to limit executive activities, even on personal social media sites. Of the CEOs studied by the authors, only 1.8% use Twitter, and only 7.6% use Facebook, while 70% avoid all social media. Beyond problems with potentially damaging casual remarks, liability might arise from improperly securing electronic sites sponsored or controlled by the company. To the degree that executives use personal social media, they should be trained in what may and may not be said about any facet of their work.

Abstracted from Business Horizons, published by Elsevier ScienceDirect, 360 Park Avenue South, New York NY 10010. To subscribe, call (877) 839-7126; or visit

Click here to access all Dimensions eNewsletters

I agree

This site uses cookies to offer you a better experience. For more information, view our privacy policy.