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Patrick Kerley is the Director of Levick Strategic Communications Social & Digital Media Practice. He is also a contributing author to Bulletproof Blog™ and can be found on Twitter @pjkerley and on LinkedIn.
Over the past several years, social media’s impact on global activism has been undeniable. Across Europe, Africa, and the Middle East, small bands of like-minded reformers have transformed whisper campaigns into all-out populist movements aimed at altering the political, economic, and societal dynamics at work in some of the world’s most troubled regions.
All the while, however, it hasn’t only been tyrannical leaders and despotic regimes in the crosshairs. Quietly, activist investors have been utilizing social media to overthrow boards, oust embattled CEOs, and reverse well-entrenched business practices at some of America’s most well-known corporations. And when it comes to digital savvy, they are often leaving their freedom-fighter counterparts in the dust.
Strength in Numbers
Take the case of Eric Jackson, who in 2007 held only 96 shares of Yahoo stock and maintained a blog with about eight readers a day. On a whim, he wrote a post about dissatisfaction with CEO Terry Semel’s performance and the need for a management shakeup. His post went viral and struck a chord with other Yahoo investors who shared his sentiments. Before long, he was getting thousands of hits a day, being interviewed on CNBC, and had built a voting bloc of investors representing more than 2.6 million shares in the company (worth approximately $60 million). Not long after that, Mr. Semel stepped down and Mr. Jackson’s online efforts are widely credited as a catalyst in his downfall.
Since then, small investors have taken to Facebook and Twitter to build support for proxy proposals and sites such as Seeking Alpha, StockTwits and Wikinvest have emerged as venues for investors to discuss companies’ valuation potential and social responsibility efforts. Among the most interesting developments is MoxyVote, a social network of corporate shareholders and advocates that aggregates investor proposals, expedites proxy voting, and helps investors support “good causes” in the areas of labor, the environment, animal welfare, and corporate governance, to name a few. Notably, investors in On2 Technologies recently turned to MoxyVote to force Google to increase its bid for the company by 25%.
In the same ways that revolutionaries half a world away are using social media to swell their ranks and consolidate their efforts, small investors are building support for their proposals and reaching a critical mass that companies simply can’t ignore.
It’s Not Just the “Little Guys”
In yet another sign that social media usage has migrated from the basement to the penthouse, the wealthiest investors out there are also utilizing digital communications tools in their bids for control of major corporations.
In a proxy battle against the Lionsgate film studio last year, Carl Icahn (one of the best known activist investors in the world) built a website rife with content supportive of his plan to “save” the film studio. He published a letter to shareholders urging them elect a new slate of directors. He shared developments as they arose. He even included functionality by which investors could vote their shares. Although his effort ultimately failed, he did create a template that is already influencing others.
At the same time, websites such as Affluence.org, Pi Capital and Family Bhive, which calls itself the “Facebook for the Fortunate,” have come online as arenas for the wealthy to engage proprietary networks of similarly affluent investors. On these sites, they can talk to their counterparts, influential financial media, and investment brokerage houses (which in most cases must pay to play) to gain insight into buying decisions and identify under-the-radar investment opportunities.
What Does All This Mean for Investor Relations Professionals?
Last summer, a report issued by Q4 Web Systems found that companies are beginning to understand that they can no longer cede control of the digital conversation to activist investors. According to the data, 93% of public companies are using LinkedIn to conduct shareholder outreach; 65% are using Twitter; 37% are using Facebook; 29% are using YouTube; and 10% make use of a corporate blog for investor relations (IR).
While growing adoption rates certainly connote progress, boards of directors and executive-level management still have much to do if they are going to catch up with those vying for control of their companies.
Due to disclosure rules, the potential for securities litigation, and speed with which information — and, more importantly, misinformation — reaches every corner of the marketplace, IR programs have understandably been among the last corporate functions to fully embrace the social media revolution. But that doesn’t change the fact that activist investors have taken their game to a new playing field — and that those public companies still on the sidelines are putting themselves at a tremendous disadvantage, should a battle for control materialize.
