Regulation FD, which regulates the fair disclosure of information material to a company’s operation, needs to be rethought so more CEOs can start blogging like Sun’s top executive, Jonathan Schwartz.
Schwartz also perceives Reg FD as a substantial roadblock to CEOs ordering the IT department to set up WordPress on a server and create a new blog. C-level executives have access to a lot of information about their companies. If an outsider had access to that information even a few minutes ahead of it being made publicly available, that person could potentially profit on the news.
That kind of situation has happened many times, and led the SEC to adopt its fair disclosure regulation. In an age where the Internet serves as the main place for many to receive information, Schwartz thinks it is time for reconsideration of Reg FD:
In order to be deemed compliant, if we have material news to disclose, we have to hold an anachronistic telephonic conference call, or issue an equivalently anachronistic press release, so that the (not so anachronistic) Wall Street Journal can disseminate the news. I would argue that none of those routes are as accessible to the general public as a this blog, or Sun’s web site. Our blogs don’t require a subscription, or even registration, and are available to anyone, across the globe, with an internet connection. Simultaneously.
That assertion is not enough to support going forward with disclosures online. Without a “formal revision or clarification” in Schwartz’s opinion, companies are stuck in a year 2000 mindset, which was when Reg FD came into being and the Internet was more on the cusp of broader usage instead of being nearly a utility for millions of people in 2006.
Schwartz has submitted a written request to SEC Chairman Christopher Cox seeing that formal revision or clarification of Reg FD. That included addressing the need to update the perception of the Internet and its efficacy as a distribution tool for material information:
To date, the SEC has not taken the position that the Regulation’s “widespread dissemination” requirement can be satisfied through disclosure through the web-postings alone. While that may have been a pragmatic approach in 2000, we believe that the proliferation of the Internet supports a new policy that online communications fully satisfy Regulation FD’s broad distribution requirement.
That brings everything back to the underlying issue – CEO blogging. There has to be a comfort level a CEO feels is in place in writing on a fairly regular, informal basis, with a potentially hostile audience reading every word.
Not every executive can be a Ted Leonsis when it comes to blogging. It’s far easier to chat about business at the back nine of a country club with trusted chums from Fair Harvard than with someone named “Echo Banana” posting in the comments section of a blog.
Evangelists of the blogging aspect to business will have to temper their enthusiasm. Not everyone, CEO or otherwise, has the temperament or even desire to go forth and post. If blogging fits an executive in a given situation, that is where it should be promoted.
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David Utter is a staff writer for Murdok covering technology and business.
