Why do people say the craziest things on Twitter?
What is it about social media that makes powerful, accomplished individuals say things that they later need to recant, walk back or at least explain?
This isn’t about President Trump (although it could be). It is about chief executives.
The tweets that Elon Musk of Tesla sent last week about taking his company private pushed investors into a tizzy as they tried to parse his every word. Regulators are examining Mr. Musk’s posts, but there is an another, perhaps broader question government officials should reconsider: Is Twitter the right forum for public company executives to disseminate market-moving information in the first place?
For years, companies and their executives were limited to disclosing market-moving information in news releases that were widely distributed over services like Business Wire or in interviews with media outlets. That is, until Reed Hastings, the chief executive of Netflix, broke ranks in 2012 and wrote on his Facebook page that the company’s video-streaming service had “exceeded 1 billion hours for the first time.”
That, in turn, led to what’s known as the Reed Hastings Rule, when the Securities and Exchange Commission permitted such use of social media. “Most social media are perfectly suitable methods for communicating with investors,” said George S. Canellos, the agency’s acting enforcement chief at the time.
But given the brevity Twitter requires — its character limit was doubled to 280 characters last year — it is perhaps inevitable that people will be misunderstood, even when they tweet with the best of intentions.
“All tweets are misleading with such a short character limit,” said Jeffrey A. Sonnenfeld, a professor at the Yale School of Management. “Companies shouldn’t be encouraging the use of Twitter for its executives. They should forbid it.”
Mr. Sonnenfeld said such a prohibition should be a company guideline, not a legislative requirement, adding he did not believe the government should get involved in what constitutes a news release.
But still, regulators could at least encourage companies to remind their executives that Twitter is better used as a place to offer idle musings rather than corporate missives.
Individuals are responsible for their own behavior — or what comes out of their mouth or keystrokes. Still, all too often, boldface-name executives, politicians and celebrities have needed to “clarify” their comments on Twitter. (I’ve had to do it myself.)
Rupert Murdoch, the media mogul, once tweeted about “scumbag celebrities” only to return to Twitter with a clarification: “I never referred to any particular people, just some ‘dodgy’ self promoting celebrities. Repeat apology for language.”
Rob Goldman, a Facebook vice president, defended the company on Twitter over the role that Russia-linked advertisements played in the 2016 United States presidential election. “I have seen all of the Russian ads and I can say very definitively that swaying the election was *NOT* the main goal,” he wrote. The company ended up issuing a clarification.
For reasons that remain inexplicable, Twitter seems to create an impulse control problem for too many — and when billions of dollars of investors’ money is on the line and the credibility of the markets are at stake, that seems like a risk not worth taking.
Mr. Musk’s explanation on Monday that his comment on Twitter last week that he had “financing secured” for taking Tesla private required a 1,008-word explanation that was almost certainly run through Tesla’s legal department — more than once.
Regulators may end up not having a problem with Mr. Musk’s message, but the existing rule has an important caveat that involves the audience it reached.
In discussing enforcement of the Reed Hastings Rule, Mr. Canellos said social media was not an appropriate vehicle for announcements “if the access is restricted or if investors don’t know that’s where they need to turn to get the latest news.”
That means if companies and their executives want to use Twitter to disseminate news, they should not be allowed to block people from following their accounts, including those who manage to get under their skin. Mr. Musk has repeatedly blocked such trolls on Twitter.
This issue is a variation of a theme that emerged in a court case this year in which a judge found it inappropriate for Mr. Trump to block users, given his public role.
Mr. Trump’s use of Twitter has illustrated the danger of disclosing market-moving information, exemplified by his tweet before the employment report in which he seemed to hint the numbers were going to be good.
It is perhaps an irresistible temptation, but one that companies have seen fit to punish in the past. Gene Morphis, chief financial officer for the specialty women’s retailer Francesca’s, was fired in 2012 for his use of social media posts like, “Board meeting. Good numbers=Happy Board.”
Perhaps the original executive maverick on Twitter was Alan Meckler, chief executive of WebMediaBrands. He started sending tweets in 2011 that would regularly move his company’s stock.
“Good chance we will be making a few acquisitions by middle of March,” he would write. Or he would send a tweet pointing out that the company’s earnings report would be out in a week, with a winking reference to promising revenue numbers: “Rev. Growth big.”
The Securities and Exchange Commission inquired about Mr. Meckler’s use of Twitter, but eventually closed the case.
It shouldn’t have, or at least it could have sent a warning. Maybe Mr. Musk would have heard it.
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