Internet's role in financial disclosure debated

Newswires oppose timing and access disadvantages that releasing reports over the Web could create

Newswires oppose timing and access disadvantages that releasing reports over the Web could create

Usually, earnings announcements come with a flurry of press releases and wire stories as publicly traded companies try to adhere to the Securities and Exchange Commission's (SEC) disclosure regulations. Sun Microsystems recently threw a curve when it made its July 30 earnings announcement on its Web site and via RSS feeds 10 minutes before sending the information out through traditional means.

"I believe this change will increase the transparency of our business, fulfill our desire to disseminate information on a fair and equitable basis, and allow the network to be used for what it's intended - connecting people and information," wrote Jonathan Schwartz, CEO and president of Sun Microsystems, on his blog. He has engaged in a very public discussion with SEC chairman Christopher Cox about the use of the Internet in earnings announcements.

In a November 2006 letter posted on Schwartz's blog, Cox acknowledges the advances in technology since disclosure regulations were adopted in 2000, but states that, were the SEC to accept Sun's new methods, "among the questions that would need to be addressed is whether there exist effective means to guarantee that a corporation uses its Web site in ways that assure broad non-exclusionary access."

The newswires tell PRWeek they are opposed to Schwartz's tactics.

"Because of the advantage to people who make the effort, it decreases transparency by reducing the audience," says David Michael, CIO of PR Newswire. "I'm having difficulty in seeing what the benefit is."

Sun is a client of PRN, which also sent out the earnings release 10 minutes after the Web site announcement. PRN learned about the move on Schwartz's blog and declined to comment on whether it will speak with him further on the subject. Sun referred requests for comment to the blog entry.

Larger than transparency is the issue of simultaneity. Financial information is typically sent through various channels at the same time. This staggered announcement, some feel, gives a few an unfair advantage.

"When we introduced NX [Business Wire's patented delivery platform], we worked with Dow Jones, Reuters, and Bloomberg," says Michael Lissauer, BW's EVP of marketing and business strategy. "Their concern was that someone would get [information] one or two seconds ahead of someone else."

The opposition to Schwartz can verge on outright anger. PRN calls Schwartz's claim that this will be the first time where "the general investing public" will have equal access "categorically wrong." (BW asserts that its information can be accessed at no charge.)

Neil Hershberg, BW's SVP of global media, left a lengthy comment on Schwartz's blog saying that Schwartz is positioning himself as a "modern day champion of the people" and asks, "[D]oes Jonathan Schwartz have a hidden agenda in promoting Internet disclosure" because, as a server company, Sun wants increased activity on the Web?

Lissauer says BW has no particular agenda in being averse to Schwartz's plan, adding that the current method has been agreed upon. "We'd like it to stay this way," he says.

Cox has remained relatively unscathed despite appearing to consider Schwartz's plan. Michael says Cox's comments are being "misinterpreted"; Lissauer says Cox needs to stay "open to any and all ideas."

"I think of Cox as being an innovator," says Thom Brodeur, SVP of global strategy and development for Marketwire. "He's one of the rare breed of leader in government [who sees] the role that technology can play."

Ultimately, no one denies that the Web is going to play an increasing role in financial disclosure. The question is what role.

"Private companies make decisions that work for them," says Brodeur. "We help our clients understand social media. Newswires are changing rapidly. As they get more sophisticated, they'll see what can be used in tandem or in place of other [tools]."

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Already registered?
Sign in