19 December 2018 by Martin Thomas
Companies should look to compliance professionals to help address any gaps in knowledge and policies
In US business circles they call it ‘showing bench strength’ – demonstrating to investors, employees and other stakeholders the broad capabilities of the senior management team. This strength is being conveyed increasingly through the senior team’s use of social media. As a consequence, the reputation of many companies is as much defined by the aggregated social media activities of senior individuals – their tweets, posts, comments, shares and profiles – as it is by official corporate channels.
Potential candidates, employees, business partners, investors and journalists are checking-out the social media profiles of the senior team. Phil Jones, managing director of Brother UK, in an interview with the Social C-suite website said: ‘I’ve learned through on-boarding coffee mornings that most new joiners have ‘socially audited’ me prior to joining. By doing this they were looking to acquire a good sense of what type of person I am, what leadership style I might have, what my principles and beliefs are and whether we, as a business, are socially relevant in a digital world.’
A senior management team that is active on social media also helps to showcase its personality and humanise the corporate brand, giving outsiders the sense that there are capable people behind it, with an array of skills, experience and opinions, who hopefully they can trust. Ann Charles’sBRANDfog agency has undertaken a CEO social media and brand reputation survey over a number of years, which has underlined how executive engagement with social media strengthens what she describes as the three key pillars that support a company’s reputation – brand trust, effective leadership and effective communication with stakeholders. It also sends out an important internal and external message that the company is committed to the use of new, social technologies and the open, collaborative and responsive culture on which the effective use of social media depends.
The benefits for a business may be compelling, but executive participation in social media inevitably poses a new set of challenges for compliance professionals. Recently we have seen Elon Musk and Tesla fined a combined $40m for a rogue tweet in which he was found guilty by the Securities and Exchange Commission (SEC) of sharing inaccurate information about the company’s financial plans.
The SEC announced in April 2013 that companies can use social media outlets like Facebook and Twitter to announce key information in compliance with Regulation Fair Disclosure (Regulation FD) ‘so long as investors have been alerted about which social media will be used to disseminate such information.’ The key line in the announcement press release came from the SEC’s Acting Director of the SEC’s Division of Enforcement, George Canellos where he said: ‘One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information.’
For example, potentially sensitive information should not be shared with an individual’s followers before it is shared with the general public through official corporate channels. Even the most innocent post or tweet by a senior manager to their social media followers, such as alluding to a forthcoming investment announcement, can technically be in breach of the rules.
The scale of the compliance challenge was underlined by a report produced by compliance specialists Nexgate in 2016. The company analysed the social media activities of the Fortune 100 companies and discovered almost 7,000 violations of various codes and regulations over a 12 month period. These included breaches of financial regulations, disclosure of regulated personal data and revealing share price sensitive information.
“Compliance professionals should ensure that the social media activities of potential C-suite candidates are checked-out before making any hiring decisions”
Embarrassingly, one of the breaches identified by Nexgate was by Twitter’s CFO Anthony Noto, who issued what he thought was a private message but inadvertently announced in a public tweet that he was recommending the purchase of another firm. ‘It’s an informal environment that encourages sharing and sometimes even trained executives over share’, was the (none too surprising) observation of the Nexgate team.
There is a clear need for compliance professionals to educate the leadership team about the most appropriate use of social media and to ensure that systems and processes are in place to spot and deal with mistakes or inappropriate behaviour. Simply issuing a set of guidelines will not suffice. The senior team needs to be brought together to discuss how they can collectively and individually support the company’s objectives through their use of social media but also agree on how to minimise risks to both themselves and to the company.
The rules need to be understood, especially in highly regulated industries such as financial services, alcohol or pharmaceuticals where there are strict controls over what can be communicated. It can be helpful for executive teams to agree on subject areas about which they will never comment, such as investment decisions, potential partnerships (even praising the performance of a potential partner could be a risk) and changes to company structures and manpower.
Policies should be developed to cover all employees’ use of social media, but the responsibilities of the senior leadership team, as the company’s highest profile ambassadors, should be made especially clear. There have been occasions in which managers have faced censure and even dismissal for using social media in a way that is considered to bring the company into disrepute, although some of these decisions have been challenged successfully where the company has been deemed negligent in its policies, training and processes.
Monitoring should be light touch, but effective. It is important to highlight that employers have no automatic right to monitor the social media activities of employees. The data protection regulations in most countries require employers to have a good reason to check their employee’s social media activities, which means that any monitoring must be considered reasonable, proportionate and relevant to the performance of the job.
One of the biggest pieces of nonsense in social media is the disclaimer that appears in a Twitter or Facebook profile stating that ‘These views are my own and do not reflect the views of my employer’, especially when the author makes it very clear in the same profile who they are working for. This may appear like a smart way for senior managers to absolve their employer from any blame in the event that they post or tweet something offensive, but in practical terms it is largely irrelevant.
It provides very little protection against reputational damage: if they say something inappropriate, they risk damaging their employer’s reputation, irrespective of any disclaimer. An article in Forbes Magazine, appropriately entitled Why Twitter Disclaimers Like ‘Views Are My Own’ Won’t Save Your Job quoted the opinions of various legal experts who confirmed that a disclaimer, irrespective of the wording, has no legal effect and would not enable employees to avoid legal liabilities.
In the words of one of the lawyers quoted in the article, Dan Schaeffer from law firm Neal & McDevitt: ‘It’s not going to prevent your employer from firing you if you say something that reflects badly, and it’s not going to prevent people from associating your views with your employer.’
Compliance professionals should also ensure that the social media activities of potential c-suite candidates are checked out before making any hiring decisions. Employers are being negligent if they do not undertake some form of background check where there might be a risk of reputational damage if the candidate’s historic behavior is discovered to be highly inappropriate.
However, as with the monitoring of existing employees, the monitoring of candidate’s social media activities must be justifiable as necessary and relevant to the performance of a specific job. Any personal information about a candidate that might be discovered – such as their sexual orientation or a disability – must not be a factor in any recruitment decision, otherwise there is a risk of the company being accused of discrimination.
Candidates should be informed that the employer reserves the right to review their (publicly available) social media activities and for their consent to ideally be gained, although it does not have to be given. The findings and conclusions drawn from the screening process should be documented to provide some protection for the employer should they be accused of undertaking an unfair recruitment process by an unsuccessful candidate. Finally, any data captured during the screening process should not be held for longer than absolutely necessary.
Social media has exposed companies to a new set of risks for which their existing processes, policies, crisis management procedures and employee training have left them ill-prepared. The smart ones will look to compliance professionals to help address gaps in knowledge, capabilities, policies
Martin Thomas is the author of The Financial Times Guide to Social Media Strategy: Boost Your Business, Manage Risk and Develop Your Personal Brand