Social media: Love it or loathe it, the ASX says you can no longer ignore it

In some instances, social media is little more than an extension of existing practices. Businesses regularly engage with journalists, and with six out of seven financial journalists now using Twitter for work, according to FTI Consulting, this means straddling new and existing platforms.

But in others, with the speed of technology outpacing law, the tail is at times wagging the dog.

Last year, for example, Netflix announced it had exceeded a billion hours to its 250,000 Facebook subscribers, which the Securities and Exchange Commission (the US equivalent of ASIC) interpreted as a violation of Regulation Fair Disclosure.

Netflix argued the announcement was very public, given its following included shareholders, bloggers and journalists.

Although there were other factors in the case (the information had already been widely shared and was not relevant to the share price) the event triggered hot debate on what legitimate conversation looks like in the social era.

In April, the SEC announced that social media could be used to communicate company information provided investors were told first.

The decision bridges existing and emerging practice, and acknowledges that social media is a legitimate and ongoing channel, without letting companies off the hook with respect to existing obligations. (For those who still think it’s faddish, remember that LinkedIn is 10 years old and Facebook almost nine.)

There will need to be future conversations about the way in which hyper-connectivity shapes communication in the finance sector more broadly.

But precisely what Australian companies need to monitor remains unclear.

And although the devil may be in the detail, senior social media lawyer Leanne O’Donnell says the guidance strikes the right balance and should not be prescriptive.

Similarly, she believes Australia’s corporate watchdog the ACCC is taking the right approach by making businesses aware of legal issues that impact marketing.

Then there are also the practicalities of how to keep tabs on the 1.2 zettabytes (1.3 trillion gigabytes) of data in the digital universe. Many companies already monitor the media and numerous existing and new players to this market offer a social media component. And while this may look like an opportunity, Australian director of Media Tenor Wadim Schreiner warns that these opportunities are not without risks.

“While at a first glance the new ASX regulations seem like a good business opportunity, there are risks involved for both the listed companies themselves and those assisting them to identify relevant coverage.

“No single service provider can claim to be able to completely find all individual mentions of each firm, and even less define a commonly accepted and agreed methodology around influence and relevance.

“Having said that, this clearly underlines a global trend that many listed companies around the world continue to ignore: that social media and engaging with communities are increasingly no longer just about understanding consumer needs but a relevant space that not just reflects public sentiment, but to what extent an organisation still has a social licence to operate.”

The ASX has been clear that it does not expect companies to monitor every single comment, only for market-sensitive information, material transactions, and market speculation.

And even though identifying where such information may arise or how it might play out is not cut and dried, no crisis is. To this extent, an adaptable and flexible management strategy should overcome any inadequacies on the listening side of the equation. Essentially this extends, rather than overhauls, existing good business practice.

Importantly it elevates social media from its fringe status into one that demands leadership strategy at the highest level, vital if Australia is to remain competitive and productive in a hyper-connected age where the internet economy is set to double by 2016.