Social media has changed how we live. We have access to extensive information and global connections at our finger tips. Given its already well-established presence in our personal lives, it comes as no surprise that social media has become a popular platform for campaigning activists. In fact, 2017 marks one decade since an individual shareholder of a web service provider voiced his disagreement with the company's business strategy on YouTube. The videos ultimately resulted in the replacement of the company's chief executive and opened the floodgates for activist shareholders.
Twitter has been the platform of choice for a famous American activist shareholder. Seth Oranburg, a Professor of Law at Duquesne University, in an article titled "How Twitter is Disrupting Shareholder Activism", hypothesized that the 140 character limit on tweets offers activists a preferential mode of persuasion: shareholders who would not otherwise read a proxy statement spanning hundreds of pages might respond to a short tweet.
The Edinburgh Centre for Commercial Law Blog reported that activists have also launched websites – such as MoxyVote (now defunct) and Carl Icahn's Shareholders' Square Table – to provide online spaces for shareholders to lobby and discuss changes to corporate governance. The power of these platforms was evidenced in 2009 when shareholders used MoxyVote to reject a takeover bid, forcing the bidder to improve its offer by nearly 25%.
Social media is not just a tool for activists or dissidents. A recent Edelman article suggested companies incorporate social media into their defence strategies before activist shareholders can control the narrative:
- Use social media platforms to help tell a story. Multimedia content, such as blog posts and visual content, can help executives tell their shareholders a more compelling story. Videos, in particular, can be entertaining and do not demand much effort on the investor's behalf.
- Target audiences with paid ads. Companies can use paid ads to reach out to investors and to ensure their stories are prioritized in search results.
- Use a cross-channel social media strategy. Companies can use social media to push out their own narratives and to direct traffic back to company websites built to counter activists.
- Establish a platform to respond to shareholders. Deploying "microsites" that deal with specific issues during contests allows companies to share more of their own content with investors and media while simultaneously providing a medium for companies to respond to dissident actions.
Social media is trending in 2017. Both activists and companies can leverage the power of real time information distribution to stimulate and also to ward off change. Issuers should be aware of the risk involved in using social media which may result in the market place receiving misleading and unbalanced information. The Canadian Securities Administrators have published a notice that tells issuers to be aware of disclosure obligations that may be triggered when using social media as a channel to communicate with investors. Character limits welcome unbalanced, selective and misleading disclosure, which may cause concern under securities laws.
Please do not hesitate to contact Norton Rose Fulbright lawyers for assistance with your social media campaign.
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The author would like to thank Elana Friedman, Summer Student, for her assistance in preparing this legal update.
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