By Myron Zlotnick

The Internet has created a great democracy of information


Expanding the marketplace of ideas has always been a hallmark of democracy so it’s welcome that social media forums give everyone a soap box, not only the traditional media outlets. If you have a keyboard and an internet connection, you can have your say on current issues or trends, or anything for that matter, and be part of the conversation. This is great for businesses looking to engage with customers and potential customers, but there’s a lot to be aware of.

Understanding the risks associated with social media

As much as the internet gives every connected citizen the opportunity to have their say, it also allows them the protection of anonymity. Often people are braver and more forthright than they would be if they had to stand behind their comments and be identified.

So you need to be aware of what people are saying about you, your business, your staff and other matters especially if the comments are false, defamatory, malicious, speculative, spurious,  hateful, you get the idea… anything that’s inaccurate or potentially harmful you need to know about.

Rumour could spell trouble for your business, especially if you’re a listed entity

At the start of May this year, the ASX announced changes to its guidelines for continuous disclosure setting out its expectations of how listed companies deal with social media.

Under continuous disclosure rules listed companies have always been required to announce market sensitive information to the ASX as soon as it’s available. For example, if a company was about to sign a huge deal that would significantly increase the company revenue, it would have to announce the deal the moment it is signed.

Now under the revised rules listed companies need to monitor social media and other news sites when the deal is pending just in case rumours about the deal are leaked ahead of the deal being announced.

If there are rumours circulating, then the ASX might expect the company to announce something to the market even before the deal is signed.

This is just one example of how the new rule affects listed companies and how social media is impacting businesses generally; and it can’t be ignored.

Understanding the practical implications of the new continuous disclosure obligations

Two companies, David Jones and Whitehaven Coal, both learned the hard way what happens when leaks or other rumours about them were recently posted on social media.

While both of these instances were hoaxes, the ASX might have expected them to announce something to deal with the hoaxes as soon as they became aware of them.

The ASX at least recognises that you need to be aware of what is being said, before you have a possible obligation to announce something.

Where it becomes tricky is trying to understand the ASX’s expectation of what “being aware” means. The ASX has said that a company only needs to monitor social media (1) at times when a market sensitive announcement is pending and maybe a trading halt is not requested or (2) at times before a material deal is signed. And the ASX also says the obligation only relates to social media sites that the company knows about and that regularly comment on the company.

That seems reasonable enough, but the ASX also says that “aware” means being aware of something you should reasonably be expected to be aware of, even if you aren’t actually aware of it.

Complicated hey?

For good measure, ASIC who wields the big stick if a company fails to comply with its continuous disclosure obligations suggest that the obligation to monitor is wider than what the ASX might be suggesting and that it is an ongoing obligation.

Not surprisingly vendors of social media monitoring tools say listed companies should be monitoring all the time.

You might say these are all just sophisticated issues confronting listed companies, but these changes are reflective of the broader business issues that social media raises for all companies big or small.

Be aware of the risks and embrace the conversation

The fact is that corporate governance is only one area where social media impacts business.

Monitoring social media and well-known news sources to some extent needs to become something medium to large business do. Just as the ASX have said for listed companies, there’s no need to monitor absolutely everything but you do need to keep a level of vigilance over what’s being said about your business, your people and your products.

Of course there’s much more to social media than mitigating risk. Consider also how you can use it to be a force for providing meaningful debate on issues impacting your industry, or what it would mean to your business to respond meaningfully to critics and make improvements to your business where needed.

Social media has become an important platform for listening to conversations, gaining market intelligence and engagement. Understanding the risks will help empower your business to make better decisions and make robust social media plans.

Do you think businesses of all sizes, listed or not, need to monitor social media?

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