CEO Bloggers? Bring it On.

Let me start by saying that Jonathan Schwartz, CEO of Sun Microsystems, is a dude. He wants to break the shackles of traditional disclosure and the cartel of the wire services in order to bring better, faster, easier-to-access information to his investors. This was reported in Bloomberg yesterday, pieces of which are provided here. As usual, I have highlighted particularly interesting portions of the article. Please ask yourself this question as you read the article: do you see any self-serving comments and/or the footprints of technical luddites in the text?

Oct. 4 (Bloomberg) -- Sun Microsystems Inc. Chief Executive Officer Jonathan Schwartz has asked the U.S. Securities and Exchange Commission to let him announce news about his computer networking company on his personal blog.

``If we have material news to disclose, we have to hold an anachronistic telephone conference call, or issue an equivalently anachronistic press release,'' Schwartz wrote in his online diary on Oct. 2. ``I would argue that none of those routes are as accessible to the general public as a blog, or Sun's Web site.''

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Allowing companies to make announcements in a blog might rekindle concerns that some shareholders are being left out of the loop, said Patrick McGurn, executive vice president at Institutional Shareholder Services.

``Once you start going to unofficial forms of disclosure, you create the risk of giving advantages to certain investors,'' said McGurn, whose Rockville, Maryland-based firm advises clients on proxy votes. ``It would raise the potential that people could be tipped to the impending appearance of the information.''

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The SEC rule requires that companies make announcements about topics including profits, new products and mergers in a filing with the agency or in a press release so that all investors can learn of news simultaneously. When the proposal was passed, the SEC said in 2000 that posting information on a Web site would ``not by itself be considered a sufficient method of public disclosure.''

``As technology evolves and as more investors have access to and use the Internet, however, we believe that some issuers, whose Web sites are widely followed by the investment community, could use such a method,'' the agency said.

Schwartz's Sept. 25 letter to SEC Chairman Christopher Cox said Sun's Web site should fulfill disclosure requirements, because it attracts almost 1 million ``hits'' a day. Michael Dillon, general counsel of the Santa Clara, California-based company, wrote in a separate blog that the Internet is the most effective means of ``timely dissemination of information to the widest possible audience.''

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``Disclosing information on the company's Web site should be sufficient,'' said Michael McCoy, a former attorney in the SEC's corporation finance division now in private practice at Bryan Cave LLP. ``It's reasonable to assume that an investor in a company would be just as likely to read the company's Web site as they would read SEC filings.''

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Michael Lissauer, a spokesman for Business Wire, the No. 2 distributor of press releases behind PR Newswire, said a blog can't ensure everyone sees information at the same time.

``You need broad and simultaneous disclosure,'' said Lissauer, whose San Francisco-based company was bought by Buffett's Berkshire Hathaway Inc. earlier this year. ``You can't get it by posting something on your Web site or by E-mail.''

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``Assuming that people who are interested in your stock are going to go to your blog is not a good approach,'' said Michelle Savage, vice president of investor relations at PR Newswire. ``You're forcing them to say `I'm going to check out every Web site of a company I am interested in and I'm going to look at them constantly.'''

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Intel Corp., the largest computer chipmaker, sought permission to distribute news on its Web site before the SEC approved its rule six years ago. Sun could serve as a sample case, testing the SEC's resolve to bring an enforcement case over online disclosure now that more investors are using the Internet, said David Martin, a Washington attorney and former head of the SEC's corporation-finance division.

``Is it satisfactory public disclosure? I think it's a close call,'' Martin said. Sun should take the approach of telling the SEC ``we are posting. Come get us,'' he said.

Well, ok then. So what's really going on here:

1. Sun has a CEO who's not afraid (at least of transparency). He wants closer interaction with his shareholders, his investors and his employees. And the problem with this.....precisely nothing. This is great. Rock on, Jon.
2. Technology has evolved to the point where a blog post or a link to a blog from a company website should be as accessible as a press release. To think this isn't the case displays either technology ineptitude (ISS?) or pure fear (wire services?).
3. There are entrenched interests that want nothing of this change. Who might that be? I'll give you a hint - the word "Wire" is at the end of their company names. This is nothing more than unabashed self-interest - they might as well lobby Congress to pressure the SEC not to make such a change (and whose to say this isn't happening as I write this?).
4. Reporting via blog or website will save money, save time and create a more efficient mechanism for information dissemination. These things benefit company managements, shareholders and analysts everywhere.

There appears to be some pretty linear and defensive thinking displayed in the Bloomberg piece. Let's review the principal criticisms one by one:

1. Pat McGurn of ISS: What's up, Pat? Are you kidding me? There is nothing subversive going on here. All one needs to do is for the SEC to say posting on a CEO blog or a company website is "official" and your concern is addressed. So we're cool, ok?
2. Michael Lissauer of Business Wire: "You need broad and simultaneous disclosure,'' and "You can't get it by posting something on your Web site or by E-mail.'' Michael, baby, come on, man. Have you ever heard of RSS? Ping notification? Feed readers? Yahoo!, for chrissake? The internet? How about Mr. Investor, who knows the companies in which he/she is invested, adds these feeds to their feed reader (choose your flavor) and is notified the instant there is new content like, say, a posting related to a disclosable event? Yeah, this really seems like an unfair playing field. Not. Your mind-set is so 1980's my friend. Step into the 21st century, ok?
3. Michelle Savage of PR Newswire: "Assuming that people who are interested in your stock are going to go to your blog is not a good approach,'' and "You're forcing them to say `I'm going to check out every Web site of a company I am interested in and I'm going to look at them constantly." Michelle, you disappoint me. Like your cartel pal Michael of Business Wire, learn something about the internet. If the SEC is ever going to enact a rule change permitting internet disclosure they will surely mandate that the relevant pages are RSS enabled (meaning people won't need to constantly hit "refresh" when staring at a company's website). Remember, these are the guys that just announced they are spending $54 million on XBRL adoption in order to make it easier for people to access and navigate SEC filings. So put your business card away for a minute and think about what you are really saying, ok? Because it makes no sense.

As I said before, either Luddites or cartel members. Surprise, surprise. If Chris Cox acts in the highly rational and forward-thinking manner that he has during most of his tenure, then he will add this to a list of major changes (a la the XBRL strategy) he is enacting at just the right time. Both the professional investing community and the investing public are ready for this change, and there are no logical reasons for such a change not to occur. Unless politics get in the way. Let's hope not.

Comments

[Roger]

John, great comment - thanks. I do think that the concept of nomination makes sense - there is one company blog, maybe the CEO blog - this is the locus of all official information dissemination. Clearly this blog content will be reviewed by counsel. This should serve as no surprise. That said, a CEO with personality could certainly add some valuable perspective over and above the basics which wouldn't run afoul of legal while providing investors with greater insight into the company's strategy and plans. I think this would be a perfectly acceptable and effective means of creating a level playing field for information dissemination. Maybe there could be a phase-in period where information could be released simultaneously across both official blogs and the wire services, after which the blog could serve as the lone source after a point once it has become broadly known that relevant company information can be located there.

In any event, an interesting and worthwhile debate. Thanks for sharing the European perspective.

[John Wilson]

I think the issue does present some fascinating challenges similar to those being thrown up by MiFID in Europe.

Firstly fragmentation. If companies can publish, will they have to nominate their "official blog" or can any blog written by a company rep or its agent count? Without the former, I can imagine chaos could follow (how many blogs would you need to track, not to mention find to monitor a company). Equally, gaming newsflow would be easy since who can be sure that the content of blog "X" does not represent an official company announcement.

Contrast this with the Regulatory News Service (RNS), in the UK which acts as a focal point for announcements in the market. Whilst the tech enables disperate sources to be consolidated, with this method the onus is on the person announcing news to make it easy for the consumer to locate/find it, rather than for the producer by making consumers find them.

Yet oddly enough, MiFID in Europe will permit fragmentation of price formation data. In part this has followed concerted lobbying by the investment banks who are sick of Reuters/Bloomberg taking their market data for free and then reselling it back to them. Now they will be able to be a publishing source in their own right. Will this make price discovery easier or harder? Presently, I think the latter, despite knowing that tech can alleviate the burden.

Secondly, will the burden of becoming an official source, materially temper the personality of CEO blogs, which IMHO are already struggling to be "honest" v PR mouthpieces? Definitely - no more immediacy of publication; PR and Legal need to check out those posts (assuming they already don't!)

Perhaps the compromise is that it could act as a parallel outlet - thereby putting price pressure on the existing outlets that could otherwise become disintermediated with free P2P services. Might it also start disemination latency "service war", reminiscent of DMA, on who can be fastest getting information - probably.

[fred]

i recommend that all of our companies release all important news on their blogs instead of an old fashioned press release.

this is just a natural extension of that.

Jonathan Schwartz is a great guy and i applaud him for pushing this

[Yaser Anwar]

At first it was seen as just something cool to do (which it is) but blogs are now being used to build personal and corporate credibility that will eventually attract customers. Examples: Trump, Mark Cuban, Henry Blodget & if I may add, Roger Ehrenberg.

These business leaders are utilizing the internet to convey their personal thoughts on happenings in their industry and life. They are blogging for the same reasons they do public speaking, to build credibility for themselves and their company's. Blogging has become a such a phenomenon because it is less time consuming and expensive way to reach potential and current customers.

I read the blogs of the aforementioned & other names, because they are full of thoughts about each CEO’s business, their market, industry trends, and more. They have an opinion and are interesting reads.

Note to Rob P: Excellent quote from the Matrix! Tx

[P-Air]

What's really interesting here is that I know at least in the case of PRNewswire & BusinessWire, they offer RSS feeds of press releases. For them to be fighting this is pretty damn hypocritical by any standards. We can't even accord them the luddite prize since they obviously know better and are just trying to put some good ol' fear out there to spook the clueless. Not sure if it's more funny or sad ;-)

Nice post.

[robpas]

Those comments by the wire service guys just tell you how nervous they really are. Their doom is implied anytime a source of information routes around them, and that is happening more and more everyday. Microsoft alone has over 80 company bloggers breaking product information everyday, that use to be press release cannon fodder.

In the words of Agent Smith from the Matrix: "Do you hear that, Mr. Anderson? That is the sound of inevitability."

[Bill a.k.a. NO DooDahs]

No surprise in the reactions. You know where they're coming from, so you know what they'll say. As I've said many times, the "why" dictates "what."

Rest assured, politics WILL get in the way. That's the purpose of politics.