The last 10 years have seen extraordinary evolutions in the responsibilities boards of directors must assume. From Sarbanes-Oxley to Dodd-Frank, directors have been subjected to new liabilities and new mandates for elevated levels of transparency and accountability. But during that time, another development has had perhaps an even greater impact on directors’ day-to-day duties than any strictures from Washington, D.C. It’s the social media revolution–and no public company, large or small, has eluded its impact.
Social media are no longer novel stakeholder and consumer outreach tools; they are the new normal in the modern business operations environment. The brand-building opportunities they present are nearly limitless. The risks they introduce are just as expansive. They affect everything from reputations to value propositions. And to many corporate leaders, they remain somewhat of a mystery.
Social networks are the venues where purchasing decisions are increasingly made, investment opportunities are increasingly weighed, and corporate adversaries — such as social activists and the plaintiffs’ bar — increasingly gain public support for their agendas. But despite that fact, the latest data indicate a significant divide between director engagement on social media issues and social media’s impact on their companies.
Last month, Stanford University’s Rock Center for Corporate Governance released the results of a survey that examined how 180 top CEOs, senior executives, and corporate directors approach the opportunities and risks associated with social media’s meteoric rise. The findings are startling: Ninety percent of respondents report a basic understanding that what is said on social media can have a major impact on their organization; but only 32 percent of their companies monitor social media to identify risks and only 14 percent utilize social media sentiment to measure corporate performance.
Only 24 percent of senior managers and 8 percent of directors request regular reports on the company’s social media engagement efforts and stakeholders’ social media sentiment. About half of the respondents do not collect this information at all.
Even here in 2012, only 59 percent of companies surveyed use social media to interact with customers. Only 49 percent use them to advertise. Only 35 percent use them for customer research purposes. And only 30 percent use social media to research competitors, new products and services, or communicate with employees and other stakeholders.
At the same time, 65 percent of respondents use social media for personal purposes and 63 percent utilize them for business purposes. Of that forward-thinking group, 80 percent maintain a LinkedIn account and 68 percent are active on Facebook. At first glance, these numbers may seem encouraging; but, in reality, they make the above cited statistics all the more alarming because familiarity with social media has not translated into C-Suite or boardroom action. The good news is that there are a number of questions directors can begin asking today that will immediately help them, and their organizations, get up to speed. To formulate a list of the 10 most critical, I enlisted the assistance of three thought leaders who understand the crossroads of corporate directorship and social media as well as any in the business world today. Catherine Bromilow, a partner in PwC’s Center for Board Governance in the United States; Chris Wood, a Senior Manager in PwC Canada’s Audit Committee Connect; and Neil Manji, a partner and leader in PwC Canada’s Audit Committee Connect, shared insights and experiences that illuminate the opportunities and risks inherent in social media engagement and provide the foundation by which directors can start asking the questions that set a strong strategic course.
1. How do we use social media to engage with customers, open new markets & recruit the top talent?
‘Social media engagement has evolved to the point it is absolutely essential in today’s marketplace,’ says Bromilow. ‘A few years ago, social media was something companies engaged in to provide themselves a competitive advantage. Now, it’s something that they have to do to keep from falling behind. Whether you’re looking to promote products, recruit talent, or introduce yourself to a new market, your audience is on social media – so your company needs to be as well.’
2. How are our competitors utilizing social media to achieve the goals outlined above? What can we learn from their efforts?
Wood argues that competitors’ social media activity provides a great deal of insight into what works and what doesn’t with respect to diverse industries that have varying audiences and different outreach goals. ‘It’s always smart to look at what others in your market are doing to leverage social media. With the analytical tools available today, companies can access a wealth of information about the tactics their audiences respond to, what drives them to take desired actions, and the strategies that establish the strongest connections both online and off. At the end of the day, both you and your competitors are attempting to reach the same people.
From that perspective, your competitors are providing you added insight with every Facebook post they publish, every tweet they transmit, and every piece of video they upload to YouTube or another video platform. Unfortunately, data from the PwC 2012 Annual Corporate Directors Survey show that this point is lost on a number of board members – 77 percent of respondents answered ‘not at all,’ ‘not sufficiently,’ or ‘don’t know’ when asked how their companies monitor competitors’ social media activity.’
3. How are our executives utilizing social media? Who are they communicating with? What are we allowing them to say?
‘Executives that engage with customers, employees, investors, and other stakeholders via social media provide themselves an air of accessibility that simply doesn’t come across with other, one-way forms of communication,’ says Manji. ‘Social media are conversational venues that empower the audience because it really feels it is being listened to. Some topics may be off-limits, and executives need to know where the boundaries of acceptable commentary may lie; but the risks are so far outweighed by the opportunities that most boards are well-advised to encourage senior leadership to build consumer and employee loyalty via social media outreach.’
4. What are our policies on employee use of social media? Are we appropriately training employees about this critical brand protection and promotion area? How often do we update the policies to ensure they are keeping up with technology?
Bromilow places a great deal of emphasis on the importance of a carefully crafted social media use policy. ‘A number of directors I’ve spoken to are concerned about employee social media use. There are productivity concerns, to be sure, but it goes even further than that. accidental leaks of confidential information? How can it prevent employees from sending inadvertent signals by ‘liking’ a certain article or ‘re-tweeting’ controversial commentary? With the advent of location-based social media platforms, how can a company ensure that potentially damaging conclusions aren’t drawn simply because an executive is in a certain city? ‘As important as this point is, the PwC 2012 Annual Corporate Directors Survey again shows that most board members are not fully engaged on the issue–69 percent of respondents answered ‘not at all,’ ‘not sufficiently,’ or ‘don’t know’ when asked how their companies employ social media use training and policies.’
5. Does our social media outreach comply with existing and potential regulations? What are the implications in terms of Regulation Fair Disclosure?
‘We haven’t seen much yet from regulators such as the SEC, FTC, or FDA in terms of concrete guidance as to what is constitutes appropriate social media usage in the investor relations realm or in industries where marketing and communications are tightly controlled, such as pharmaceuticals,’ says Bromilow. ‘With so many concerns related to Regulation FD and other questions of compliance, boards need to be reassured that 1) company social media engagement comports with all existing regulations, and 2) that they know how to respond should an external connection such as a Facebook fan or Twitter follower post commentary that could be
6. Are we actively monitoring popular social media platforms for negative publicity about the company?
‘It used to be that companies really only had to worry about a damaging headline in the daily paper or a negative report on the nightly news,’ says Wood. ‘Now, they have to be on the lookout for individual stakeholders who may comment about a negative experience on social media platforms, because the inter-connected nature of social networking means that the story could go ‘viral’ before the company even knows it’s out there.’ Bromilow adds that social media monitoring isn’t just about reputational risk management, but brand building as well. ‘When a consumer does put something out there that could be damaging to the brand, companies need to remember that it is only the start of a conversation. If they respond quickly and act fast to resolve the problem, they often win points for their care and attention to the matter–and they do so in a public venue where others can see just how seriously they take customer service.
Even with all the ways that social media can make or break corporate reputations, the PwC 2012 Annual Corporate Directors Survey once again shows a disconnect on the issue, with 69 percent of board members answering ‘not at all,’ ‘not sufficiently,’ or ‘don’t know’ when asked how their companies monitor social media for adverse publicity.’
7. Are we actively monitoring plaintiffs’, activists’, and regulators’ social media activity for clues as to where our next crisis might arise?
Manji sees social media monitoring not just as a tool that allows for rapid response should reputational problems arise, but as an early warning system that can alert the company to problematic issues before they evolve into something worse. ‘You’ve got activists using social media to build groundswells of support around issues of corporate social responsibility. That activity represents actionable intelligence that companies can use to nip potential problems in the bud before any of these adversarial parties can leverage them to damage the company in the courtroom, the Court of Public Opinion, or in terms of customer loyalty.’
It’s important to note as well that the plaintiffs’ bar and even regulators engage in the same type activity–and provide the level of insight into their plans. When plaintiffs’ attorneys write blog posts that help them lay the groundwork for their next class action or regulators take to social media to discuss enforcement agendas, those companies that are listening understand–and can plan for–what’s coming next.
8. What are we doing to build a burgeoning community of support in the social media space— one that is large enough to enable direct stakeholder communications that can circumvent the traditional media filter?
To Wood, amassing multitudes of Facebook fans, Twitter followers, or YouTube subscribers is about more than a mere demonstration of brand strength. ‘When a company draws stakeholders to its key social media properties, what it is really doing is creating a conduit by which the company can directly communicate with its customers, shareholders, employees, and others. In this context, social media are avenues that enable companies to bypass the traditional media filter and transmit messages precisely as they are intended. That’s an asset that is particularly valuable in crisis or in situations where misinformation is permeating the marketplace; but it is also one that can’t be put into action unless the company has used peacetime to build its audience.’
9. What is our strategy for reaching out to the most influential social media voices covering our industry? Are we treating them with the same respect we would show 60 Minutes or the New York Times?
‘Just like in the traditional media, social media are venues where some voices matter more than others,’ says Manji. ‘That means companies need to know who controls perceptions related to their industries and do what is necessary to build productive working relationships with those influential voices. It might be a blogger with 10,000 daily readers. It might be a pundit with 20,000 Twitter followers. But no matter the person or the venues he or she might populate, it is incumbent on companies to understand that the most powerful commentators on social media have the same reach, and speak with the same authority, as most traditional media outlets today.’
10. How are we integrating social media strategy with our Search Optimization (SEO) and Marketing (SEM) efforts? Are we taking steps to ensure that these critical initiatives support each other on an ongoing basis?
media engagement is now a key element in the online ‘race to be found.’ With so much clutter online, today’s companies are constantly looking for ways to ensure that their online properties rank high on the most popular search engines. As Google, Bing, Yahoo, and others evolve their algorithms to include social media content to greater and greater extents, the value of smart social media strategy rises exponentially–as it not only strengths corporate reputations, but increases the chances that those enhanced brands will be noticed amid a constant and highly competitive contest for online attention. As the latest data indicate, there are still a number of directors that are concerned about the risks associated with social media engagement today. In some cases, that’s a prudent perspective. But as Wood reminds us, ‘The greatest risk of all is failing to capitalize on all of the brand-building opportunities that social media present. These online venues are where consumers, investors, regulators, and the full gamut of corporate stakeholders make decisions. To be absent from the conversations that impact your industry is a hazard simply too dangerous to invite.’