LeadershipLeadership Strategy
The Floodgates Are Open: Shareholder Activists Intensify Social Media Utilization
Richard Levick
Former Contributor
I write about the intersection of business and public affairs.
Apr 25, 2011,05:43pm EDT
Updated Aug 11, 2011, 12:48pm EDT
This article is more than 10 years old.
The dam broke in 2007. That was the year we first really saw the immense potential for change – good or bad, depending on your perspective – when activist shareholders engage the social media.
The shareholder in question, Eric Jackson, posted videos on YouTube and created
what is now a very high-authority blog to air grievances about Yahoo’s business performance. Small investors, representing around 2.6 million shares, responded warmly. Six days after a contentious board meeting, chief executive Terry Semel stepped down. The online initiative had clearly played a major role in the shake-up.
The additional significance of such a campaign is that it
creates activist shareholders as well as organizes them. The social media have “the potential to move groups of shareholders from passive administrators to active participants,”
says Marcus Birkenkrahe, a professor of business information technology at the Berlin School of Economics and Law.
Proxy votes and pending transactions are at play even as social media campaigns drive governance decisions, C-Suite or board hires and fires, and socio-political agendas. The question naturally gets begged, how can companies – including the largest-cap brands on the market – best respond to ensure fair dialogue that serves everyone’s legitimate interest?
At a point in time when, according to a
2010 Brunswick Group study, 60% of U.S. investors say that social networks will significantly influence their decisions, corporations must at least grasp the scope of social media penetration; identify the forces behind it; and assess specific potential impact at every strategic and operational level. For example:
- The activists are using an integrated approach by leveraging all available outlets: Facebook, blogs, websites, YouTube, wikis, and Twitter. By so doing, they do more than just get their messages to the greatest number of investors. As Eric Jackson points out, in his case a full social media Monty also provided multiple opportunities for small Yahoo investors to pledge their support and, importantly, to contribute their own ideas on how Yahoo should improve.
- Taking this integrated approach a step further, us.proxyexchange.org seeks to create an online forum allowing shareholders to join voting blocs by transferring their proxy-voting rights to other investors who share their points of view. It’s an intriguing concept, as it uses the social media to actually create whole coalitions empowered by investors to act as their own proxies.
- The activists aren’t just inciting small investors. They’re also working to ensure that small investors can expeditiously cast their votes. Among such online venues, Moxy Vote is a two-year-old social network for investors and advocates that co-founder Mark Schlegal calls “a proxy adviser for the individual.” Investors can send proxies to Moxy Vote and vote directly from the site. Thanks to Moxy Vote, small shareholders in On2 Technologies forced Google to increase its bid for the company by 25%.
- Predictably, activists are also aggressively using the Web and social media to press their agendas on environmental and human rights issues. On Moxy Vote, for example, investors can sign up for proxy recommendations from such groups as the Humane Society of the U.S. and the International Brotherhood of Teamsters.
- Not just messaging, activists are using the social media to initiate social campaigns. As You Sow launched a grassroots online initiative to have the Coca-Cola Company research the effects of certain chemicals on its aluminum cans. A vote on the issue is scheduled for April 27.
- Nor is it just a David and Goliath scenario as big names in M&A are either using or likely will use Web-based resources to rally support. Carl Icahn, for one, launched a site excoriating the board of Lionsgate and seeking to replace five directors with his own people. The fact that this particular bid fell short is less important than that such a proxy fight, which once required months of preparation and individual shareholder outreach, was waged in a trice and at minimal expense.
- Wealthy investors are using proprietary social media networks to evaluate investments and identify opportunities. Sites such as Pi Capital, Affluence.org, and Family Bhive (which calls itself the “Facebook for the Fortunate”
pose a particular problem for IR teams since they cannot monitor conversations or provide corrective messaging. All they can do is redouble their outreach to these important constituents via normal communications channels, including other social media.
- Short-sellers are using the social media to pursue their own interests. In February, for example, a “research” organization called Muddy Waters (that does not deny it also shorts companies) criticized the accounting practices of China MediaExpress. That company’s shares dropped more than 33% the day Muddy Waters went viral. The Muddy Waters online report was enhanced with considerable discussion on Twitter.
These varied examples confirm that the social media impact is across the board: transactional, operational, ideological. For public companies, there is pressing need to respond in kind: to monitor what is being done, to craft strategic responses, and to disseminate those responses. Absent that, officers and directors can lose control of their own destinies.
There are numerous examples of companies that now effectively engage social media for other purposes than promoting goods and services. eBay tweets updates on earnings calls and analyst meetings. Amgen uses the Web to survey shareholders about executive pay. Intel has interactive online Q&As and allows shareholders to vote online during its annual meeting.
Alcoa is an
apparent leader. Its
Facebook page has nearly 14,000 followers and a lively
Twitter account with 2,600 followers linked to the earnings release, earnings call webcast, and the investor presentation. Such companies are at least sending a message that they’re as much a part of the 21
st century as their activist shareholders.
That said, as recently as 2009, studies found only 3% of U.S. large companies using social media as part of their IR communications. It’s not hard to understand this reticence. Corporations face risks online that the activists don’t. Their missteps are brand-damaging if not actionable. Every Tweet can have global impact.
Yet as the activist investors become more organized, focused, and aggressive – and as investors of all types now engage more directly with corporate websites, bypassing PR wire channels – silence is the really perilous choice. The solution is to approach the social media with dedicated teams of digital communicators; with formal policies and procedures that define what can and cannot be done in every social media venue; and by seamlessly coordinating all online engagements with senior executive teams to safeguard the brand at every turn.
It’s a tall order, but there doesn’t seem to be much choice.
Richard S. Levick, Esq., is the president and chief executive officer of Levick Strategic Communications, a crisis and public affairs communications firm. He is the co-author of The Communicators: Leadership in the Age of Crisis and Stop the Presses: The Crisis & Litigation PR Desk Reference, and writes for Bulletproofblog. Mr. Levick is on the prestigious list of “The 100 Most Influential People in the Boardroom,” which is compiled by the NACD and Directorship Magazine
. Reach him at [email protected].
