Web Disclosure Whitepaper
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The document discusses how the rise of the internet and social media has led to a publishing revolution, disrupting traditional models of information dissemination. It argues that investor relations also needs a new disclosure model that leverages the power of web-based publishing to increase control over messaging, improve transparency, and better measure the impact of disclosures. Currently, companies primarily use their investor relations websites for compliance purposes, but the document advocates moving towards a new web disclosure model to save costs while better serving investors.
Web Disclosure Whitepaper
- 1. IT’S TIME… FOR A NEW DISCLOSURE MODEL. IT’S TIME TO UNLEASH THE POWER OF THE WEB FOR DISCLOSURES
- 2. IT’S TIME FOR WEB DISCLOSURE. INCREASE CONTROL, IMPROVE TRANSPARENCY AND MEASURE THE GLOBAL IMPACT OF YOUR DISCLOSURE MESSAGE. When JCPenney shut down production of its “Big now mainstream and ubiquitous, with over 200 million Book” in November 2009, it marked the demise of an blogs (Source: Technorati, Wikipedia), 400 million iconic catalog that had been a publishing staple for Facebook users (Facebook 05/10), 58 million Twitter the last 36 years. It also demonstrated the role of users (comScore 10/09), and 466 million YouTube Internet-based technologies as catalysts for market users (comScore 10/09). change and disruption. Many other examples exist Years to Reach 50 million Users today, including Google and the advertising industry, Apple and CDs, Amazon and books, Netflix and video rentals, and Skype and landline telephones. Further market disruptions are being fueled by the revolution in Web publishing. If you’ve posted a status update to Facebook, uploaded a photo to Flickr, or streamed a video on YouTube, you are part of this revolution. These consumer-focused publishing tools have attracted the early adopters, but user-generated content has now spread to the masses. Today, everyone can communicate directly to everyone else – in multiple formats that completely bypass Source: United Nations Cyberschoolbus Document, Mashable traditional intermediaries. This direct form of communication has also made its Social media adopters are not just reading content way into business communications. Many written by others - they are also contributing. Web 2.0 companies now leverage tools such as Twitter, has changed how people consume information, and it Facebook, and online video to speak directly to their has also provided them with the tools to create, customers and key stakeholders. In Investor distribute, and share it. Barriers to producing and Relations (IR), however, this publishing revolution publishing content have been lowered – in fact, these has yet to fully take hold in how companies distribute tools are available from every cell phone. information and in the way investors consume it. As a result, an unprecedented amount of content is It’s time to make the change in IR. Technology and being created, posted, and shared by the masses. On the real-time nature of the Internet provide an an average day, over 800 million updates are shared opportunity to save issuers money and improve the on Facebook (Source: Facebook), over 50 million efficiency of the disclosure process while providing Tweets are sent (Source: Mashable), and more than better control, better reporting, and a better end user 3.5 years of video content is uploaded to YouTube! experience to investors. (Source: YouTube) These trends are nothing short of a revolution – a publishing revolution involving the mass creation and THE PUBLISHING REVOLUTION dissemination of information. New modes of content creation have in turn spawned new ways to distribute The Web has profoundly changed the way the world and consume that information – methods that are communicates. What started as a way to improve disrupting traditional models of information productivity and exchange information via simple publishing. connectivity tools like e-mail has grown to embed itself in the fiber of our daily lives. Nowhere is this Today, anyone can create an RSS reader page more pronounced than in the meteoric rise of digital customized with feeds from various news sources, or media, blogs, and social networks. These tools are create a Twitter feed of influential people they follow,
- 3. or receive breaking news SMS alerts to their mobile THE CURRENT PUBLISHING MODEL FOR phone. Real-time status updates from Twitter and DISCLOSURE Facebook are now included in Google and Yahoo When it comes to corporate disclosure, the Securities news searches. and Exchange Commission (SEC) has long One result of the revolution in citizen publishing is recognized the role of web-based communications. In the disruption of the traditional news media by the 1990’s, webcasting of earnings conference calls bloggers and online journalists: 24 of the 25 largest emerged as a primary method for complying with newspapers experienced record declines in Regulation Fair Disclosure (RegFD). Companies circulation in 2009 (Source: Yahoo! Finance), and provided access to their webcast via their IR website employment in the sector is down to levels not seen and announced broad availability of the webcast via a since the 1950s. press release. Collapse of newspaper employment Sarbanes-Oxley then placed a much greater reliance on the Web as a viable means of disclosure. From Number of jobs in thousands mandatory posting of periodic reports to electronic filing and posting of Section 16 filings to Reg G archiving requirements, the regulatory changes to deliver more information faster to the market forced companies to utilize the Web. In this environment, the IR website became a mission critical application, not only for regulatory compliance but for meeting the information needs of investors. Companies came to realize that not only can the Web help them comply with regulations, but it could also be a more powerful and effective way to communicate to all of their stakeholders. Source: Bureau of Labor Statistics Growth in IR Website Traffic, 2001-2008 Other sectors are experiencing similar disruptions as a result of the convenience and cost-effectiveness afforded by new business models, for example iTunes and the music publishing market or Kindle and the book publishing market. Investor Relations is also in the midst of a Publishing Revolution, one in which online authoring tools combined with RSS feeds are making content creation and dissemination easy, immediate, and ubiquitous. Web-based publishing has and continues to be a critical part of the IR officer’s (IRO) arsenal for meeting disclosure requirements as well as for broadly disseminating the company’s message, particularly during earnings periods when timing and management of the message are critical. The tools have been around for years but their relevance for IR is even more important now given the changes in news creation and consumption. For Then in August 2008, the SEC published new example, the message boards of the Web 1.0 world guidance on the use of IR websites, confirmed their have evolved into sites like Stocktwits and Seeking importance as a key source of company information, Alpha - influential social networks with users who are and encouraged their further development as a former institutional investors and who exchange disclosure vehicle. The guidance confirmed that the information through an online community website. IR website can, if certain criteria are met, be used as the only source of company information, without As a result, companies are increasingly violating RegFD or other securities laws. Both the using alternative channels to reach investors directly. New York Stock Exchange (NYSE) and NASDAQ From updating website content to making content followed by changing their listing rules to allow for this available via RSS feeds, these web-based publishing type of disclosure. tools improve efficiency, enable global reach, and allow for interactive feedback, while putting control of the message back into the hands of the IRO.
- 4. The guidance appeared at a timely point. Thomson 4. Limited reporting capabilities “We have long recognized Reuters survey discovered that 75% of institutional IROs receive limited reporting on their press the vital role of the Internet and electronic investors access IR websites weekly or more often, release communications. Most rely on their PR communications in and 90% of institutional investors find that a teams to monitor media coverage or the number modernizing the disclosure company’s IR website influences their perception of of sites that carried the press release system under the federal that company. announcement as a proxy measurement for securities laws and in reach. IROs are looking for more. Demonstrating promoting transparency, Yet in practice, with the exception of well-known liquidity and efficiency in the high value placed on analytics surrounding a companies like Sun Microsystems and Google, our trading markets.” company’s disclosure, our research uncovered companies continue to rely heavily on the traditional that IROs need the ability to monitor: - SEC – Commission press release as the primary method for meeting Guidance on the Use of disclosure requirements. Thomson Reuters surveyed Response to the message in the media Company Web Sites more than 200 IR and PR professionals in Feedback from buy-side investors along with October/November 2009 on their earnings disclosure ownership data and any changes in their practices and the results indicate several major holdings following the disclosure drawbacks inherent in this model: Sell-side analyst commentary and reaction 1. The model relies on intermediaries to reach investors Impact on the stock price To reach investors, journalists, and web destinations, a press release travels through a Buy-side questions ahead of a webcast convoluted set of intermediaries that include 5. IR press releases are costly regulators, exchanges, wire service providers, Our research suggests that the perceived value and content aggregators – all before it reaches of an earnings press release is out of sync with investor desktops, editorial departments, IR its actual cost. The per word, per circuit, per websites, and media properties. release pricing model yields average costs of $4,000-$6,000 per release, with a package of 2. Press releases alone do not technically meet four earnings releases potentially costing over disclosure requirements $20,000. Companies are looking for ways to To truly meet disclosure requirements, a lower costs and improve the efficiency of the company needs to ensure that material news is disclosure process. posted on their IR website at the same time it is being released to a wire service. In practice, delays exist between the time a release crosses the wire to when it is posted on an IR website or on news aggregation sites. In addition, material content within the release is often shared with press release distributors prior to disclosure, often via unsecured e-mail, introducing another potential weak spot. 3. Most press releases are text-only and do not include related content The traditional press release is in most cases limited to text and therefore provides limited engagement with the end user. Very few press releases include video or audio or even links to supporting materials. Tables included in the release require investors to cut and paste the financials into their models – clearly an inefficient way of managing and sharing company information.
- 5. “The things that I consider TODAY’S CURRENT DISCLOSURE MODEL best in class for websites are good notification of when the conference calls and other presentations are going to be, availability of slide decks from those presentations and other presentations that they give to the Street at conferences, ability to go and access the financial statements of a company online in an easy to read format, and fact books if the company has them.” – U.S. GARP Investor. A NEW PUBLISHING MODEL FOR DISCLOSURES
- 6. A NEW PUBLISHING MODEL FOR DISCLOSURE videos, images, and presentations that can be “We think the Web shared across the social web. disclosure model provides Technology and the real-time nature of the Internet an efficient and effective way for our issuers to provide an opportunity to save issuers money and 3. The model provides Exposure in addition to improve the disclosure improve the efficiency of the disclosure process, Disclosure process and achieve cost shifting the economic value from the distribution of This approach combines website posting with savings while meeting the earnings release to the analytics of how the simultaneous broad distribution to key disclosure regulatory and listing message was received. outlets, newsrooms, and third party websites. requirements. This new model shifts the value to The company can drive traffic back to the Thomson Reuters, in consultation with the New York issuers from the disclosure section of its IR website via links, e- dissemination of the Stock Exchange, is proposing a new model for mail alerts, and RSS feeds, ensuring that information to the message disclosure, one that increases transparency to investors have access to the latest and most analytics around the investors, places control back into the hands of the response to that comprehensive content related to the disclosure. IRO, and increases the overall value of an earnings information.” disclosure. 4. Companies can measure the impact of the - Theresa Molloy, Vice The key components of this new model include: disclosure with detailed analytics President, NYSE Euronext Another benefit of the Web is its ability to provide IR websites with a robust disclosure section comprehensive reporting on publishing activities Web-based press release publishing tools and website traffic patterns. Metrics such as what pages visitors are viewing most frequently, Broad and simultaneous distribution to satisfy webcast attendance, and the volume of e-mail disclosure requirements alerts sent are standard. This model takes the Detailed web analytics on how the message was analytics a step further with key metrics that can received. help IROs assess the impact of their message on their overall IR program. These include: This model offers several major benefits to companies: Tracking how a press release affects stock price movements and impacts ownership 1. Web publishing tools increase the dynamics company’s control of the disclosure process Utilizing an online publishing tool, a company Feedback from buy-side investors and can simultaneously self-distribute its earnings commentary from sell-side analysts release directly to its IR website, required Earnings mentions and sentiment in disclosure points, and other selected outlets. traditional and social media The tool creates a secure workflow process for handling material information and allows the Overview of news coverage and reactions company to control the timing of the distribution, from top industry influencers eliminating the need to submit the release to a 5. Improved efficiency third party hours before it’s issued. This is of This new disclosure model lowers costs and particular value during the hectic earnings improves the efficiency of the disclosure process season when companies are often refining their by putting control back into the hands of the IRO. message up until the last minute. It also It streamlines the IR workflow by bypassing provides the peace of mind in knowing that traditional disclosure intermediaries and creating when they press “send,” the release will hit all a secure, straight-through processing approach. required disclosure channels at the same time. And by leveraging the IR website as the point of disclosure and the associated publishing toolkit, 2. The IR website becomes the primary point of it provides a cost-effective solution to disclose, disclosure to provide investors with engage, and analyze. increased transparency In addition to posting the release directly to a company’s IR website, this model advocates a robust disclosure section on the site to provide an engaging end user experience that allows investors to easily find and access the level of detailed information they want: quick access to earnings webcasts, the ability to navigate to previous quarters, downloadable financials in Microsoft Excel and XBRL formats for importing into their models, dynamic links to relevant SEC filings, the ability to sign up for email alerts or subscribe to RSS feeds, the ability to search for key words across all relevant documents, and access to related multimedia content such as
- 7. COMPARISON OF DISCLOSURE MODELS CONTACT THOMSON REUTERS +1 866 915 9891 TRADITIONAL NEW WEB-BASED PROCESS PROCESS corporateservices@thomsonreuters;com Relies on third parties Puts control back in your thomsonreuters.com for message creation & hands with self- distribution publishing tool Material content shared Secure workflow for with third parties prior to posting material content disclosure – no third party involvement Wire services distribute You distribute directly to to outlets critical to all channels required for disclosure, financial compliance, key sites, media sites and financial & media sites, website aggregators and the IR website Delay from publishing to Simultaneous posting on your IR distribution to your IR website website – no latency Text transmitted without Relevant and interactive related content content published to the disclosure section of your IR website Limited reporting Robust reporting and analytics Expensive Cost-effective & efficient CONCLUSION Web disclosure unleashes the disruptive power of Internet-based technologies and provides an opportunity for IROs to ensure control and compliance through simultaneous distribution, increase transparency to investors, and to assess the impact of their message with detailed measurement and analytics. The Web disclosure model outlined here redesigns how IROs communicate information about their company and how investors are able to interact with that information on the company’s IR website. It gives them much greater visibility into what information investors are accessing and insight into the potential impact it may have on their ownership base. It provides a view into the online buzz about their stock and which industry influencers are impacting their market activity. And it gives them significantly more control over the distribution process, all while lowering costs and increasing efficiency. A new model for disclosure…it’s time.