Social Media and #CorpGov – 2012 ICGN Rio Annual Conference

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Yes, I’m here in Rio for the ICGN Annual Conference.  Here are my remarks for the panel on Social Media and Corporate Governance.  Let’s get this conversation on social media happening with CEOs and their boards.  It is too important to building trust and transparency.

 My Remarks:

Ola, Stephen, Santiago and the ICGN conference committee for including me in this amazing event.  For the past 15 years I’ve been active in engaging the internet and social media for my business & personal development.  As a result, my colleagues in corporate governance have labeled me the “Digital Whisperer”.  Today I’d like to share some of my experiences and “lessons learned” with you.

We are early in the internet age.  This 2nd generation of the internet (web 2.0) is where individuals, investors, activists and companies can use the web as a media platform to shape the perception of their company and their board.  You control your own site, or blog, or tweet; and are able to control your own data.  The importance of the company’s web site is well understood by most of us.

Less understood is the importance of interactivity, another key feature of web 2.0.  Being “social” in the digital age means creating the opportunity for user-generated content on line, and using this interactive feature to exchange information.  We know these applications such as: Facebook, Linked In, Blogs and Twitter.

In the first wave of the digital economy, the focus was on one-way conversations corporations were having with their customers.  The marketing department was in charge of overseeing that information was carefully controlled and distributed.  Marketers are known for talking, not listening.

We are now in the second wave of the digital economy.  Two way connections will dominate with less hierarchy, not more hierarchy.  Information about your company, its products, and its policies can no longer be carefully controlled and distributed.  As you and your board become digital citizens, you will be leading socially enabled enterprises with your stakeholders, your board members, and your key investors.

Take a moment to think where you were 8 years ago in 2004 when Facebook was being launched.  I was sitting with CEOs in their boardrooms briefing them on what I was seeing in their operations from a risk, safety, health, and environmental perspective.

I had limited time with them so my job was to inspire them to improve their profits by enhancing the safety and sustainability of their workplaces and products.  This included focusing on the people, products, use of resources and supply chains that made them money.  The way to focus on these audiences is to listen to them.

Investors, stakeholders, and the employees on the loading dock all have ideas for improvement and an opinion about the job management is doing.  This has always been the case.  What has changed is that now several platforms exist for these individuals to communicate their ideas and attitudes.  They now find, nearly instantly, that these ideas and attitudes are shared by their peers.  When their opinion captures the sentiment of others, then “word of mouth” becomes magnified at large scales with customers, employees, investors and activists.  These events become opportunities or risks, and can quickly shape a company’s future.

The impact of social media on corporate governance is a new concept.  It is not yet embraced by most boards.  We are literally building the plane as we fly.  My training and expertise is in risk management.  For the last 8 years I have been applying fundamental principles of enterprise risk management to social media.  Today I will share some of these findings.

Many corporate executives are ignoring social media due to their personal time constraints.  If you feel like you’re running as fast as you can doing your job now, then the thought of spending time tweeting, reading blogs and going on facebook, etc. sounds like an unimaginable idea.  Please remember that ignoring new trends has not been shown to be effective for you or your company.  So take a breath, strap yourself in, and get help if you need it.  Being left out of this revolution is not an option.  It will happen with or without you.  You don’t want to be disconnected from this.

The average age of independent directors in the S&P 500 in 2008 was 61.2 years:

  • Independent directors under 65 yr:  34% are using social media;
  • Over 65 yrs:   23% are using social media (8% growth from last year)

By comparison, 80% of 18-24 year olds are on social networks.

Getting boards and their CEOs to understand the concepts and power of social media is made more challenging when they have not begun the journey to learn about it.

An IBM survey said “16% of CEO are using social media now; 57% will be using it in the next 3-5 years.  Many CEOs now understand that they need to listen and communicate both narrowly and broadly to build trust.

With our without your CEO using social media, people will be on line talking about hot issues like: CSR, Executive Compensation, no votes on directors, ESG investing, conflict minerals, constrained resources especially water, political contributions and diversity (especially gender representation of the board and officers).  Without any contribution from the board or the CEO, these conversations will be a disruptive to investor relations.  Those not listening will be taken out.

I recently tweeted to my followers in our #corpgov community: “Do you know someone who brags that they don’t text, tweet or care about social media?”  I like to diplomatically tell these folks that their digital zipper is down; and it is not helping them look relevant.

Two way communications is about human behavior and the on-line platforms have made it essential to modern accountability.

CEOs are under the microscope and being talked about in all social media platforms: 14.2% of the world’s largest 2,500 public companies replaced their CEO in 2011 due to #sayonpay, stock performance, poor judgment, or unacceptable ethics (Booz & Co).

Using risk analysis, we can see that the focus of the corporate board is transforming from “inside out” (what we’re doing) to an enlightened “outside in” (what others are saying).  It is critical to the board’s success that this shift in focus be factored into strategic decisions.

I work with clients using a 3-part Risk Framework:

1.   Internal (Compliance): Controls and audits to avoid and eliminate risk.  This includes employee/director policies on use of social media, resources for social media listening, war room for crisis response, etc.

  • Internal Fraud – misappropriation of assets, tax evasion, intentional mismarking of positions, bribery
  • External Fraud- cyber-risks, theft of information, hacking damage, third-party theft and forgery
  • Employment Practices and Workplace Safety – discrimination, workers compensation, employee health and safety
  • Clients, Products, & Business Practice- market manipulation, antitrust, improper trade, product defects, fiduciary breaches, account churning
  • Damage to Physical Assets – natural disasters, terrorism, vandalism
  • Business Disruption & Systems Failures – utility disruptions, software failures, hardware failures
  • Execution, Delivery, & Process Management – data entry errors, accounting errors, failed mandatory reporting, negligent loss of client assets.

2.   Strategic (Operational):  Risk maps, indices and event scenarios enable interactive discussions to achieve strategic objectives.  Directors would love to have more time for these discussions.

3.    External (Reputation):  Progressive CEOs & corporate boards are beginning to utilize social media war rooms to listen to the conversation and analyze risks.  Scenario planning, identifying black swan events, etc.

Understanding this framework can help you develop the playbook for your organization:

  • Offensive plays identify compliance and strategic risk, and
  • Defensive plays improve your listening from an “outside-in” perspective.

Key Tip:  Don’t be intimidated by “big data”.  Well developed tools exist for this.

One of the biggest opportunities for business today is access to real time data from social media.  It is called “big-data”…you can actively aggregate, mine, analyze and understand what is happening “in the now”.  This is in contrast to our looking backwards on historical data.  This is what progressive companies are using now in their risk analysis.

All of the new information generated in the world in the year 2000 amounted to about 2 million terabytes. The digital universe now generates more than twice that much in a single day.

Here’s how social media is being used in 2012 for proxy and annual meetings:

Social media war rooms to combat viral threats to reputation

Business has shifted to a real-time environment, and social media tools are evolving to keep up. They are building (SICC) Social Intelligence Command Centers

1. Start With a Purpose

Organizations can have various goals when looking to set up a “SICC” including event management (such as the Super Bowl), real-time reactive engagement and content creation (such as the American Red Cross), etc.  Once you’ve defined your purpose, you can begin envisioning the space.

2. Envision the Space

The term “space” is used broadly here because a SICC can be in a room, a pod of desks, a mobile technology configuration, etc.  Components of the process include roles (analyst, community manager, content producer, traffic director, editor), workflow (approvals, escalation protocols, crisis plans), KPIs (what does success look like, how do we show it?), schedules (did you know social media doesn’t sleep? Will the SICC sleep?) and a handful of other components.

When envisioning the space, the components listed above will dictate the design of the space and how it functions. This isn’t just about a room with big screens and a nice logo – it is about planning, coordinating, training, designating and executing in a room designed with a purpose.

3. Build Your Team

The team involved in a SICC is scalable in number, but must function as a unit cohesively. The team should have a firm grasp on the communication goals, tools, social technologies, the brand and the community.  Without community, the SICC is like an airport – mission control, pilots, planes, security protocol, everything – but without passengers.

4. Know Your Technology

SICCs are flexible and inclusive of many platforms at any given time.  From a physical technology perspective, we’ve found SICCs should have television for real-time events and news, large screens so teams can work together and as many white boards as possible. Dual-screens help team members use the numerous tech tools together and conference lines should be setup to facilitate communication with people in the room and others around the world.

 5. Go Beyond Listening

Effective crisis strategy isn’t just for stormy weather.

  • Frequency and intensity of conversations
  • Sentiment or tone of posts and patterns
  • Key fans or critics present, and frequency of their posts
  • Incorrect information, misquotations, or slander
  • A pattern of comments that uncovers an organizational blind spot, or a “ball that has been dropped”
  • Legitimate requests for information in a crisis
  • Breaking news concerning the brand, especially from influential non-traditional media sources

All of these elements help implement a responsible triage strategy and protect your reputation.

So far, these centers have not been built for corporate governance or investor usages.   But their basic structure can be adapted for these purposes.  Organizations and brands using this for marketing are:  Dell, American Red Cross, Gatorade, and more…Coca-Cola seems to recognize a simple fact: social media is a complex channel, and asks their marketing and advertising agencies to help it listen better.

  • Skills and structure needed in boardrooms to oversee social media; lessons from investor successes in ESG using social media
    • Nestle – palm oil – public apology & restructure supply chain
    • Eric Jackson was able to engage a call to action for investors to unseat directors on Yahoo’s board in 2008.  This was a concept ahead of its time!  With the rapid development of social media, this example of “Investor Spring” will be repeated.
    • Sequoia Fund organized a social media campaign to remove James Johnson, Director at Goldman.
    • How to perform a social media audit– here’s what I tell Risk for Good clients:
      • 1.  The time is NOW to get your board “on board.”  Start with a briefing to baseline your board on the fundamentals of social media risks and opportunities:
        • Baseline your business, your competitors, and mentions of your key executives in the social media.  Identify where your business is positioned in the conversation: Google, Yahoo ,Bing, Facebook, Twitter, LinkedIn.
        • Understand the sources where you can get independent information and business intelligence.
        •  Expand your sources of information on the business beyond management reporting.  Asymmetrical information risk analysis.
      • 2.  As you start asking digitally literate questions of your CEO, have a baseline “Social Media for the Boardroom” assessment of your company from an enterprise perspective:
        • Know the risks on how your company is using social media.
        • Map out your company’s current social media engagement.
        • Identify what Marketing is doing for outbound conversations, along with other departments (human resources, customer service, etc.).
        • Summarize what is being said by whom on major social media sites (Google, Facebook, Twitter, LinkedIn).
        • Analyze your website from the perspective of an investor concerned about corporate governance.
        • Identify current policies for employees, contractors, etc.;
        • Begin the discussion on your business readiness to manage crisis communication on social media;
        • Identify how your board is being portrayed in social media. Think executive and board compensation, say on pay, etc.
        • Use this briefing/assessment to introduce your board to the fast-changing communications happening on line.

What should be in a company’s and an investor’s social media toolkit?

Doug Chia, Corporate Secretary at Johnson & Johnson speaks about how J&J used their blog to get results out in real-time from their annual shareholders meeting.  This is an example of using tools set up for marketing for investor relations.  Doug is leading the way using social media tools for investors.  Additionally J&J is using Moxy Vote for retail investors.

The investor relations community is working to use on-line tools in their practice.  They recently had a major milestone for StockTwits, Investor Relations and Social Media

 On a recent FedEx (FDX) earnings call, Investor Relations Director Mickey Foster said something remarkable:

“During our question-and-answer session, callers will be limited to one question in order to allow us to accommodate all those who would like to participate. If you are listening to the call through our live webcast, feel free to submit your questions via email or as a message on StockTwits.com.   Preference will be given to inquiries of a long-term strategic nature.”

Let me close by quoting Machiavelli and Mother Nature:

Machiavelli: “All courses of action are risky, so prudence is not in avoiding danger (it’s impossible), but in calculating risk and acting decisively.”

Mother Nature:  “Our brain that routinely tricks us into making three mistakes:

  • Overestimating threats;
  • Underestimating opportunities; and
  • Underestimating resources to handle threats and fulfill opportunities.”

Social media is simultaneously the biggest threat and the biggest opportunity for our business to prosper in the connected world.  What action will you take to help frame this opportunity and threat for your team?  If not you, then who? If not now, then when?

 

#ICGN12 Social Media

Social media, the investment community and corporate boardrooms alike increasingly see social media as a channel for advancing goals as well as a risk to manage. This breakout will cover: how companies use social media war rooms to combat viral threats to reputation; skills and structure needed in boardrooms to oversee social media; lessons from investor successes in ESG using social media; how to perform a social media audit; and what should be in a company’s and an investor’s social media toolkit?

Provocateur Investor: Santiago J.D. Chaher, Managing Director, Cefeidas Group, Argentina

Provocateur Corporate: Fay Feeney, CEO, Risk For Good, USA

Moderator: Stephen Davis, Executive Director, Millstein Center for Corporate Governance and Performance Yale School of Management, USA

For an excellent resource on social media:

Corporate Governance and Social Media: A Brave New World for Board Directors

New publication by Santiago Chaher and James Spellman. With foreword by Stephen Davis!

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