WASHINGTON: The Securities and Exchange Commission (SEC)'s recommendation Wednesday, July 30, that rules be set to govern how corporations disclose their earnings and other information on their Web sites could drastically impact the newswire business and shift the way IR and financial PR pros execute their communications.
Public companies, in their efforts to adhere to Regulation FD (Reg-FD) and Sarbanes-Oxley (SOX) rules, have been notoriously weary of using the Internet as a public space for the dissemination of material information. However, this move from the SEC is a step toward making it possible for companies to adhere to regulatory policies without using some of the more traditional methods.
The use of the Web to distribute information, particularly for earnings disclosure, would immediately impact the newswires, which have been the accepted mode to widely disseminate financial information.
PR Newswire (PRN), though, remains confident in its ability to maintain success.
"The primary motivation of people using PR Newswire is to promote their company by rapidly disseminating information to a broad audience," said Ken Dowell, EVP at PRN. "The value that we provide is going to continue to exist [regardless] of the disclosure requirement. We're monitoring the situation closely."
The issue surfaced last year when Jonathan Schwartz, CEO of Sun Microsystems, decided to issue its earnings through the corporate Web site, before pushing the information out via newswire (PRWeek August 6, 2007). The newswires were largely opposed to the idea at the time, due to issues of fairness and simultaneity. With the recommendation looming, they are now in a wait-and-see mode about how the upcoming guidance will handle those issues.
"There's a broad range of communications activities that happen with companies," said Tom Becktold, SVP of marketing at Business Wire. "I don't think [the SEC] is looking at one area. We really need to fully understand what they're saying."
Thom Brodeur, SVP of global strategy and development at Marketwire, said the company wasn't surprised by the announcement, adding that it has always looked to the Web to enhance its offerings.
"The SEC is in lockstep with the changing times and the way the Internet and technology is being leveraged," Brodeur said. "But I don't think one replaces the other. It suggests that Web sites are being added as another tool or option."
"From my standpoint, the benefit will be that companies will be more robust about the information presented to investors on the Web," added Jeff Morgan, president and CEO of the National Investor Relations Institute. "Now the guidance is catching up to the technology."
Thus far, most companies have been leery of using Web sites to provide investors and other audiences with regulated information- like earnings.
Beth Harbin, director of PR for Southwest Airlines, is hesitant about changing its current system with PRN, though she acknowledges the positive benefits, which have helped carve out a place for earnings on the airline's Web site.
"Since we started our... site, we've always had a vision of making it extremely robust," she said. "We currently have earnings up on our Web site, as part of a system developed through [PRN]," she said. "It also puts that release right in the hands of the reporters who need it."
"The news at the moment is that everyone wants to know more information," Morgan said.