Possibilities and Pitfalls of Social Media

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Social media platforms have been hailed for their potential to democratize information. They provide forums for the general public to interact with politicians, celebrities and even business leaders in ways that would have been thought impossible just a decade ago. In today’s business climate, many consumers expect companies and their leadership to engage with consumers on social media.

While these platforms can be a valuable marketing tool to reach customers, it also offers companies and their executives an opportunity to embrace corporate transparency.

The business community should use platforms like Twitter to ensure the public has easier access to information about financial performance and corporate governance, as well as openly and proactively addressing when things go wrong and detailing how executives will address the problem.

Southwest Airlines Co. was praised recently for its speedy dissemination of information on social media platforms after one of its jets experienced a hard landing at New York’s LaGuardia Airport in 2013.

While more corporate openness could subject businesses to greater scrutiny, it can also have tangible benefits in areas like customer retention and make the company more attractive to job candidates.

A 2016 study conducted by data-analytics firm Label Insight found that 94 percent of consumers said they were more likely to remain loyal to a brand that is completely transparent, and 39 percent said they’d switch to a new brand if it offered full transparency around its products.

Social media engagement could prove to be a boon when something goes wrong. A 2018 study conducted by marketing firm Sprout Social found that 85 percent of consumers would be more likely to “stick by a business during a brand crisis” if that company has a history of transparency, and 89 percent said a company that admits to a mistake and is open about how to resolve the issue could regain their trust.

Being perceived as transparent could also help businesses attract new talent and retain current employees. The Sprout Social survey also found that more than 20 percent of millennials say a transparent chief executive “would encourage them to consider a career with that employer in the future.”

Of course, social media engagement comes with the potential for pitfalls. Many a press firestorm has been sparked by a corporate leader’s less-than-choice remarks.

Scott Chen, president of West Hollywood-based dating app Grindr, which tailors itself to the LGBTQ community, triggered social media backlash in December when he stated on his personal Facebook page that marriage is between a man and a woman.

And one must only look at Tesla Inc. Chief Executive Elon Musk’s tussles with his shareholders and the Securities and Exchange Commission for a reminder of the pitfalls publicly traded companies face if executives disseminate nonpublic information via social media channels.

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