Social media: boon to business or compliance death trap?

Why executives and general counsel need to keep compliance in mind when developing social media guidelines

You just had a baby, and you want the world to know about it, so tweet away! You just got a new job, so you better jump on Facebook and LinkedIn to update everyone on your status change. Your company just got news that it cracked a huge milestone and you want to brag about it to the whole world, so you better… well, you better take a deep breath and a step back, and think about compliance issues before you start spreading your company news – good, bad or otherwise – across social media.

Twitter traps

The first two examples above are very personal in nature, and speak to the heart of how most people use social media – to spread news to family and friends. The last scenario, though, is a different animal altogether, especially if you happen to be a C-level executive at a publicly traded company. Netflix CEO Reed Hastings found out the hard way that having a quick trigger on social media can be potentially problematic when his tweet bragging about Netflix passing a billion hours of streaming media gave his stock a jolt. This drew the attention of the SEC, which deliberated over whether or not this action violated Regulation Fair Disclosure.

Luckily for Hastings, the SEC ruled that corporations can disclose information over social media, as long as they let investors know which channels are being used for this purpose. This narrow escape represents just one example of how companies have made boneheaded moves on social media due to poor understanding of the channels, lack of planning, impulsivity or lapses in judgment.

‘Avoiding #FAIL’

There are a number of ways that companies can fail at social media, often because social media strategies are not vetted by general counsel or other high-level decision makers. Many of the biggest social media gaffes of recent vintage are outlined in a new book by social media monitoring company ListenLogic.

The book, Avoiding #FAIL, is simultaneously amusing and horrifying, showing how brands can be harmed by fake Twitter accounts, impulsive execs and misunderstanding of the difference between social media and other forms of communication.

Co-founder of ListenLogic and co-author of the book, Vincent Schiavone, recommends that companies apply their risk maps to social media, and solicit input from all areas of the business, from financial to HR to legal, in order to ensure a comprehensive compliance strategy. In this way, companies can take full advantage of the benefits of social media – immediate and effective communication – without running the risk of a regulatory smackdown. After all, spilling the beans on a friend’s pregnancy or engagement is one thing, but incurring the wrath of the federal government is another, so being social media savvy is essential.

Managing Editor

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Rich Steeves

Richard P. Steeves is Managing Editor of InsideCounsel magazine, where he covers the intellectual property and compliance arenas. Rich earned a B.A. in English Literature...

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