There was a time when companies could send out different messages to customers, investors, and staff and each group would be oblivious to what the other was hearing.
Those days are long gone and digital and social media have changed the game. Total transparency is now pretty much compulsory.
But it has taken a long time for regulators to catch up with this brave new world. The SEC's decision this week to allow companies, CEOs, and senior executives to communicate information via social media such as Twitter and Facebook is a step towards dragging the system into the 21st century.
The proviso is that they must inform shareholders they are going to be communicating in such a way beforehand, thus complying with the regulator's overriding edict that material information must be provided simultaneously to all. The SEC is effectively saying social media is now so ubiquitous it amounts to simultaneous communication, which is not exactly an earth-shattering conclusion for anyone who works in PR.
The development was finally prompted by Netflix CEO Reed Hastings, who famously posted on his personal Facebook page about the company's monthly viewing exceeding one billion hours for the first time in June last year.
Individual social pages are not ruled out of the new regulation, but companies must alert shareholders to watch these personal pages beforehand as well. So, presumably, interested parties will have to try to become friends with the CEOs and senior executives within companies they want to follow, which is good news for Facebook, maybe not so much for the privacy of those individuals.
Remember how Randi Zuckerberg was annoyed when a family picture she posted on Facebook (to 300,000 of her "closest" friends…) found its way onto Twitter. CEOs will be mindful of this when posting and C-suite execs and their companies will all need advice from PR pros and IR specialists to navigate these choppy waters.
Let's face it the SEC isn't exactly ahead of the curve here. It took the financial regulator until 2008 before it even allowed companies to disseminate information on the internet. The news this week was greeted not with a backlash, rather a “why has this taken so long.” It will allow companies to generate closer links with investors and make the whole process less formal, as well as getting information out much faster than filing to an obscure regulatory website.
Bodies such as the SEC and the FDA have been reluctant to draw lines in the sand on social media, preferring to let companies develop best practice themselves and only step in when something happens that upsets the apple cart, such as Hastings' statement.
In 2011, Facebook acted proactively in the case of pharma companies by stopping them from disabling the comments function on their pages on the social network. They preempted any rules by the FDA as they saw that this policy was unworkable in the long term. Food companies have also been proactive in self-regulating in an attempt to avoid draconian measures being forced upon them.
It seems regulators such as the SEC and FDA prefer this, rather than having to intervene themselves, because they aren't then opening themselves up to opprobrium from the web community - and no doubt they quietly work away in the background to influence best practice. But sometimes they simply have to step in, and Hastings brought this indelibly into focus with his Facebook post.
The 2008 ruling on web transmission of filings hasn't led to the destruction of wire services. If anything the Microsoft case in 2011, when information set to be published on its website came into the public domain before the official filing, brought the benefits of wires more firmly into focus.
This ruling won't mitigate the need for IR firms and official press releases to help companies communicate information. Social media will become another tool to engage stakeholders, and will add more personality and transparency to the financial communications process. It means more communication, and this has got to be a good thing for shareholders, companies, and PR pros alike.