Update on the current board issues: December 2014

December 2014
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BoardroomDirect®<br><span>Update on the current board issues: December 2014</span>

At a glance

As companies continue to measure the risks and rewards of social media, boards are looking to management to bring some order to the chaos in the form of policies. Whether or not they participate in the myriad of social media channels, directors are becoming more aware of the potential risks. For instance, in PwC’s 2014 Annual Corporate Directors Survey 41% of directors say they are now at least moderately engaged in overseeing the company’s monitoring of social media for adverse publicity – compared to 31% in 2012.

Issue in focus

Management and board oversight of social media

Companies continue to measure the risks and rewards of social media. Whether or not they participate in the myriad of social media channels, directors are becoming more aware of the potential risks and the importance of social media policies.

In PwC’s 2014 Annual Corporate Directors Survey, 41% of directors say they are now at least moderately engaged in overseeing the company’s monitoring of social media for adverse publicity–compared to 31% in 2012. There was also an 11 percentage point increase (to 42%) in the number of directors who are at least somewhat engaged in overseeing employee social media training and policies.

This development is not surprising when you consider that, according to PwC’s State of Compliance 2014 Survey, by 2020 each person will have more than six devices with which they can communicate using social media. Nearly 90% of those compliance executives surveyed said they have an employee social media policy, up from 65% in 2013.

“Policy management is an area that is difficult for companies to stay on top of,” said Sally Bernstein, a PwC risk consulting principal. “While most of our survey respondents said they have a social media policy, technology is changing very fast. How do you make sure that policy keeps up with the pace of technology change? This is an area that needs focus.” [See a video of Sally Bernstein discussing social media policies.]

A typical company’s employee social media policy generally applies to official company blogs, forums, tweets, Facebook posts, and videos, as well as personal social media usage if the employees refer to the company or its products. It also likely reminds employees to follow the company’s code of conduct and sets out procedures for having official posts approved by a manager.

Some companies have gone as far as using social media to communicate both internally and externally about compliance and ethics issues. The PwC compliance survey showed that 51% of respondents use internal social media channels to communicate about these issues, while 41% use external social media to communicate with investors, the public, government and other stakeholders.

In order to manage the implementation and effectiveness of a social media policy, most experts agree there needs to be an education program coupled with a way to measure activity. In some cases, a company’s marketing department takes the lead to carry these out.

But in many cases there is a fine line between what is covered by the policy and what is not, especially when it comes to an employees’ personal views.

“If employees are legitimately expressing themselves, there can be a significant backlash if you try to restrict their behavior,” Robert Sanchez, a partner at Wilson Sonsini Goodrich & Rosati, said at the NYSE Governance Services 2014 Boardroom Summit. “Education has to go hand in hand with the social media policy.”

Albert Percival, governance counsel for Whole Foods Market, who also spoke at the Boardroom Summit, points out that management and the board have to be aware of the legal and cultural implications of a social media policy. He worries that if a company is “overzealous” in restricting social media usage, it could have a negative impact on the company culture.

Companies and boards have to be aware of regulations that involve employee and management communications, such as Regulation Fair Disclosure (Reg FD), guidance from the National Labor Relations Board (NLRB), and the Federal Trade Commission (FTC), according to Sanchez.

In addition to the employee social media policy, many companies are creating social media crisis plans to help management address issues that can arise due to statements from an employee, executive, customer, shareholder, or competitor. However, not all companies are doing this in anticipation of an event. Given the dynamic nature of social media, many companies have been forced to create crisis plans as they face the ramifications of negative tweets, online videos, or posts.

“The scale and velocity of social media is unlike anything else we have ever had in the boardroom,” Liane Pelletier, director of Washington Federal and Atlantic Tele-Network, said at NACD’s 2014 Board Leadership Conference. “It’s one of the scariest things we have dealt with.”

Plans are necessary as more and more people integrate social media into their everyday routine.

“We have people waking up and checking Twitter and Facebook to see the news of the day,” said Judy Smith, a crisis expert and former White House deputy press secretary, at the NACD event. “Social media is a game-changer for anything that anybody is doing.”

What to do when a social media crisis hits

Smith has some advice for what to include in a social media crisis plan, and the steps to take when facing such a crisis:

  1. Get the facts. If it’s a case where someone in your company communicated something, find out what they said and determine what they should have said. Then own the mistake when you do something or say something.
  2. Ensure the social media crisis plan includes the names of members on the crisis team and their specific duties. Among these should be representatives from legal, communications, and human resources. The plan should also address how to communicate to internal stakeholders.
  3. Know your company’s baseline responding to social media communications, such as tweets. It’s good to determine how many tweets it takes before you respond. (While setting such a threshold is difficult, Twitter usage should be continually monitored.)
  4. It’s good to have some social media experience under your belt by having a positive presence on Twitter, Facebook and other platforms. You don’t want your first foray into social media to be when combatting negative activity about your company.

Questions directors might ask

  • Does the company have a social media crisis plan? If so, what does it include?
  • How frequently does management update the plan for changes in the environment?
  • Does the social media policy take into account the regulations affecting communications and employee speech, i.e., Regulation Fair Disclosure, National Labor Relations Board guidance, and Federal Trade Commission regulations?
  • Does management have a plan to educate employees and the board about the company social media policy, and to periodically update this education? As the environment changes, the policy may need to change and as a result, the education.