Tales from the US: Innovations in stakeholder communication

The more things change, the more they stay the same.

The United States continues to lead the way in pioneering new and innovative ways for companies to communicate with stakeholders. And while technology is playing an increasingly important role in that process, the ‘rules of engagement’ in the digital age are much the same as before…

As the birth-place of modern corporate communication, the US continues to lead the world in finding new ways for companies to interact with their audiences. With more than 6 million corporates all trying, in some way, to engage with investors, journalists, analysts, customers, politicians and any number of other stakeholders, it is little wonder that competition is fierce and innovation is key.

As a result, it pays to keep track of the emerging trends coming out of the US to see how they might be applied in Australia.

For publicly-listed companies, most of the recent American innovations have centred on making better use of technology to engage with shareholders and the investment community at large. This has been driven, at least in part, by necessity: following the financial meltdown of 2008 and the corporate governance questions the collapse raised, US investors demanded more transparency from companies and better access to management. The response has been multi-faceted, but one of the most striking innovations has been the move towards greater use of technology as a tool for investor communication.

However, while these new tools are now being embraced by the straight-laced corporate-types that would’ve shunned webcasting, social media, online forums and the like just a few years ago, the important thing is that the thinking behind how these tools are used hasn’t changed: the same rules of open, transparent and trust-building communication endure.

New Tools

In April last year, the US corporate regulator, the US Securities and Exchange Commission (SEC) ruled that social media channels such as Twitter and Facebook were legitimate platforms to disseminate price-sensitive information. In its report, the SEC said: “An increasing number of public companies are using social media to communicate with their shareholders and the investing public. We appreciate the value and prevalence of social media channels in contemporary market communications, and the commission supports companies seeking new ways to communicate.”

There are some important caveats in the SEC’s report: the social media channel used should not have any access restrictions, as this would constitute selective disclosure; and investors should first be alerted by the company that it may use social media for the purpose of market announcements before it does so.

Predictably, the number of companies that maintain an active investor relations presence on Twitter has since soared – and it’s not just tech-related companies that are doing it. As US fund and asset managers, retail shareholders, sell-side analysts and other market stakeholders are widely recognised as the most web-savvy investment community in the world, a range of companies large and small have taken to social media to disclose information.

Technology is also being used to breathe new life into statutory reporting events. Some US companies have changed their approach to analyst conference calls at quarterly financial results, experimenting with various formats and tools to make the more inclusive and engaging.

Yahoo! Inc Q4 2013 Earnings Source

Yahoo! Inc Q4 2013 Earnings    Source

Perhaps understandably, the early adopters have been the technology companies themselves: probably one of the best examples is Yahoo! Inc, which now hosts a quarterly live webcast of its analyst conference call where CEO Marissa Mayer and CFO Ken Goldman take questions from analysts in newsroom-style studio at Yahoo Inc. headquarters in California.

There are numerous other examples of how US corporates are embracing technology and new digital tools to communicate – earnings announcements are being written to optimise search engine recognition, companies are monitoring Twitter conversations around their ‘cashtags’ (a companies ticker preceded by a ‘$’ sign) and investor relations-specific corporate blogs are being launched to provide ongoing activity updates. All of these innovations are interesting and, to an extent, may show the way for Australian companies to engage with the investment community in the future.

Same Rules

The striking thing about all of these examples is that – while the execution and delivery of the corporates’ messages is new and different – the thinking behind them is the same as it’s ever been.

The SEC report-inspired boom in social media disclosure is just another way for a company to communicate with its target audience in a timely fashion. And in the US, in many cases that target audience has been using social media platforms to interact with one another and share information for a number of years. The speed and inclusiveness of social media is great, but it would be worthless if the people the company needs to reach were not using Twitter. So the ‘rule’ hasn’t changed: place the audience at the centre of the communication planning process and consider what channels are best to reach them.

In addition to Yahoo! Inc, another of the early adopters of the live broadcast analyst call was Netflix, which was said to be inspired by Warren Buffett’s annual on-stage interview at the Berkshire Hathaway AGM. Buffett is famous for his open and straightforward communicating style, once explaining that he writes his must-read annual letter to shareholders with his two sisters in mind: “Though highly intelligent, they are not experts in accounting or finance. My goal is simply to give them the information I would wish them to supply me if our positions were reversed. To succeed, I don’t need to be Shakespeare; I must, though, have a sincere desire to inform.”

The webcasting of analyst calls is a neat innovation, but it would fall flat if it didn’t fulfil its main purpose, which is to inform the investment community in a simple and engaging way – much like Warren Buffett’s annual letter.

These US examples make interesting reading and could well be a sign of things to come in Australia and beyond. But the fundamentals of market communication endure: be clear about who the audience is and how it is best reached, and then communicate clearly and in a way that will engage.

Regardless of how the message is delivered – via social media, market announcements, presentations, live webcasts, the financial press, one-on-one meetings or a myriad of other channels – the preparatory steps of any stakeholder communication activity continue to be the most important.