Social Media Throwdown: Netflix v. SEC

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    Crisis management for a clash of modern vs. traditional communication

    While the rest of the business world has boarded the social media train, an incident earlier this month involving Netflix CEO Reed Hastings brought to light an important question: How do you avoid having your social media communications run afoul of regulatory bodies that are behind the times?

    Here’s a rundown of the situation, from a Reuters article by Ronald Grover and Sue Zeidler:

    Hastings wrote in the post on the company’s public Facebook page on July 3: “Netflix monthly viewing exceeded 1 billion hours for the first time ever in June.” The post was accessible to the more than 244,000 subscribers to the page.

    Netflix received what is known as a Wells Notice from the U.S. Securities and Exchange Commission, which means the SEC staff will recommend the full commission pursue either a cease-and-desist action and/or a civil injunction against Netflix and Hastings over the alleged violation.

    Netflix may have run afoul of the SEC’s Regulation FD, adopted in 2000, which requires public companies to make full and fair public disclosure of material non-public information.

    “We think posting to over 200,000 people is very public, especially because many of my subscribers are reporters and bloggers,” Hastings said on Thursday in a letter. He also said that he did not believe the Facebook posting was “material” information.

    You would be hard pressed to find many who would deem a post on a major organization’s Facebook page to be anything less than “fair public disclosure” but apparently the SEC employs at least a few that don’t feel the same way.

    Hasting’s initial response was pretty much on track, although we would have recommended padding it a bit by paying some respect to the efforts of the SEC, and he certainly has the court of public opinion on his side by dint of sheer popularity – both of Netflix and social media – but other organizations may not find themselves in such an advantageous position when facing down regulators.

    So, what can you do to mitigate the impact of a similar situation?

    As we’re so fond of saying, the best form of crisis management is crisis prevention, and you’ll limit the potential for damage simply by being prepared. Get your legal and social media teams together and hammer out the details of a communication plan. Social media can state what they intend to share, and legal can then draw parallels from traditional, approved communication methods (and by reaching out to critical stakeholders like the SEC) so that there is documented proof that your organization made every effort to comply. Keep these two in close communication and even if trouble does manage to sneak in, you should be able to thwart it with little harm to reputation or the bottom line.

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    For more resources, see the Free Management Library topic: Crisis Management
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    [Jonathan Bernstein is president of Bernstein Crisis Management, Inc., an international crisis management consultancy, author of Manager’s Guide to Crisis Management and Keeping the Wolves at Bay – Media Training. Erik Bernstein is Social Media Manager for the firm, and also editor of its newsletter, Crisis Manager]