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Why
 
corporate
 
boards
 
should
 
blog
 By Dominic Jones and Pam Agnew, ABC |IR Web ReportJanuary 11, 2005DESPITE all the changes that new laws like Sarbanes-Oxley have brought to how companies aregoverned and managed, one thing has still not changed: directors still don't talk to their shareholders.Sure, boards and directors may have private meetings with highpowered institutional investors on issues of corporategovernance, but they almost never communicate in an informalway with rank and file shareholders and other stakeholders.The blogging technology platform, when properly executed,provides boards and legitimate shareholders with a transparentplatform to seriously engage one another on the issues. It canprovide boards with a low-cost, highly effective means toestablish a credible dialogue and allow directors to obtainfeedback from a wider variety of shareholders with differing viewpoints.
Blogging provides acredible platform forongoing board-shareownercommunication.
To be sure, the concept of director bloggers is a new and dramatically different approach to board-shareholder communication. However, this is simply a case of taking an existing, proven technologyand customizing it slightly for another purpose.After carefully studying how blogs work and how the blogging community interacts, we are convincedthat the technology offers a highly attractive opportunity for forward-thinking directors and boards. Itenables boards to get their message out, and at the same time provide a forum for shareholders tooffer informal input to their elected board representatives.
The
 
current
 
model
 
is
 
broken
 In spite of all the upheavals in boardrooms recently, directors are still as inaccessible as they'vealways been. They're largely cut off from the people they are supposed to represent. Except for theannual meeting and annual reports, shareholders rarely hear from directors.Boards themselves seem to recognize that there is a problem. This month, the Conference Boardissueda report on the future of annual meetings. It says there is frustration that annual meetings arenot effective forums for discussion. "Formal annual meetings do not lend themselves to serious,informal discussion," the report says.The report's key recommendations include using the Web more in shareholder communications andannual meetings, and creating "a series of alternate forums where investors and corporatemanagement can examine critical, long-term issues."Similarly, in a joint National Association of Corporate Directors and Council of Institutional Investorstask force report in March 2004, both sides agreed that current practice isn't working."Many shareowners have been frustrated over the years by what they see as a wall between them andtheir elected representatives, the board of directors. They feel that they have no input into selectingdirector nominees, no meaningful choice in their election, and, generally, no hope of ever hearing fromor exchanging views with them," said the task force's24-page report(PDF 138KB)www.irwebreport.com 
 
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Ultimately, though, if directors want evidence that the current model is broken, then the real test mustbe shareholder sentiment and awareness. And that's where the evidence is that boards andmanagements still have a long way to go.Last week, General Motors launched a blog for vice-chairman Bob Lutz. Most of the discussion in theearly stages has centred on vehicle design.A recent telephone survey of 2,152 workers and 1,880 investors conducted between November 5 and14, 2004 by Rasmussen Reports, an independent public opinion research firm, found that 80% of U.S.workers and 76% of employed investors had never heard of the Sarbanes-Oxley Act.Among working investors, defined as owning at least $5,000 in stocks, bonds and mutual funds, only7% indicated that Sarbanes-Oxley had increased their confidence as an investor. Likewise among thisgroup, only 7% said it had increased their confidence in the leadership of public companies.So, despite companies spending millions of dollars and hundreds of hours meeting new Sarbanes-Oxley requirements, there is very little awareness from the public at large. This can't be helpful tobusiness, especially if it wants to have its voice heard on public policy.
Boards
 
must
 
reach
 
out
 
and
 
communicate
 
their
 
story
 Clearly, directors must accept that governance done behind closed doors is not governance seen tobe done. Companies and boards will not get credit for the improvements and efforts they've madeunless they tell people about them.Boards need to be more accessible to shareholders -- and the Internet, more especially the bloggingapproach to Internet communications, is the best way toachieve this.A directors' blog would be an inexpensive, technically simple,but highly honest way for people to interact and dialogue on theWeb under a set of accepted rules. Blogging sites includefeatures that can give corporate boards a direct link to thedesktops of people who care about the company, regardless ofhow many shares they own.
A directors' blog is aninexpensive, simple touse and inherentlytransparent medium forserious, informaldialogue.
Blogging is a more honest and inclusive way of communicatingwww.irwebreport.com 
 
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on the Web because it is difficult for any one party to dominate the discourse. Shareholders would beable to comment on Web postings by directors and other commentators. They would also be able topost comments on their own blogs and have these linked from the board's blog. Anyone with a right tohave their say as a shareholder would have an opportunity to do so.A board blog is like an electronic Town Hall, something recommended by former SEC chair RichardBreeden in his report on WorldCom and now being implemented by the renamed MCI. Except thatwith a blog, the board has a perpetual online meeting. It can call together shareholders at any time toseek input or inform them of important developments at the board level. It's a highly effective way forboards to keep shareholders informed of what they are doing at a negligible annual cost.
How
 
board
 
blogging
 
would
 
work
 Board blogging is not as radical an idea as it might sound. Blogging has recently been given credibilityby some high profile companies. Last week, for instance, General Motors vice-chairman Bob Lutzlauncheda blogwhich is little more than a sales tool, but which promises to be more. He follows thelikes of Sun Microsystems'Johnathan Swartz. AndSAP AGhas one of the best executive blog programs on the Web. In fact, blogging is less radical than the discussion forums which forward-thinking companies like Shell, with its Tell Shell forum, host on their sites.Furthermore, blogging technology would help boards to more easily implement the recommendationsof the joint NACD and CII task force on shareholder communication. In their report, the twoorganizations call for boards to improve shareholder communication on the Web by posting all "non-trivial" shareholder questions and the company's answers on the Web to "help ensure a regularstream of information of interest to shareholders."With traditional websites, providing a regular stream of questions and board answers is burdensomeand time consuming. That may explain why, almost a year later, none of the more than500 companieswe track, currently meets the joint task force's best practices.
Managing comments is easy to administer
Blogging software makes the process of receiving and responding to questions and issues easy forboards to control and manage. They can establish and enforce rules of procedure for questions andcomments on the blog. Boards would have the option to permit questions to be posted immediatelywithout prescreening, or to have them go into a queue to await approval for posting.By setting up the site so that only shareholders with a valid identifiable code would be able to postquestions, the system would be more efficient than the current practice of receiving questions via anopen email address or email form. There would be fewer misdirected questions from general traffic tothe company's website.The commenting system would be directly owned and administered by the board, or an appointedoutside intermediary, to give directors guaranteed unfiltered access to the questions fromshareholders. Shareholders, in turn, would also gain greater confidence knowing that the board willhear them uncensored.
Trackbacks keep communication honest and transparent
 Of course, boards may agonize at the prospect of having to exercise judgment over what comments topermit and which to exclude. And some shareholders would be skeptical of the openness of thedebate if boards were seen to have total control.However, the blogging medium offers a counterbalance to the board's control over any debate througha technology called trackbacking. Trackbacks allow anyone with a blog, or in this case shareholders ofyour company who have a blog, to provide a link from a post on your site to a related post on theirs.www.irwebreport.com 
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