Archive for category Threats

Activist Stockholders Gain Strength

My fourth and latest book, Insidious Competition – The Battle for Meaning and the Corporate Image, is scheduled to be published in June 2010. For more information about my new book, please click here to go to the book’s Web site.

Rows of locksIn the book, I discuss nine different types of insidious competitors present in social media. One of those types of competitors is NGOs and Activists, the “irregular” competitors that are the basis of our discussions here at Telofski.com. In fact, it was from the research on Insidious Competition that the concept of irregular competition evolved.

Well, putting aside irregular competition for a moment, I’d just like to mention that one of the insidious competitor types I discuss in my book is Activist Stockholders, cousins of the irregular competitors NGOs and Activists. In reviewing my news feeds recently I discovered the article “Divided SEC Proposes Investor Access Plan” which talks about how Activist Stockholders may be gaining more strength in their struggles against corporate management.

This article is quite interesting and updates an issue which I have been following for a while. The issue pertains directly to the discussion of Activist Stockholders as it appears in the book. Summarizing, the article discusses relaxation of U.S. Securities and Exchange Commission (SEC) regulations for shareholder balloting in annual public corporation elections. You know. The annual “proxy fight.” The proposed rule changes would make it simpler for various stockholder groups to gain access to the corporate board and thereby control certain corporate decisions.

In my new book’s discussion of this type of insidious competitor, I mentioned that there is a pending rule change. I also mentioned that that change may take place as soon as early 2010. From what this article says, it looks like I was right. When this regulation change is combined with the force and power of social media, as I pointed out in the book, the influence of the Activist Stockholder will increase tremendously. And because of this potential shift in power, it should be incumbent on all C-suite executives and corporate communications personnel to learn how to deal with this impending threat to corporate operations.

Insidious Competition – The Battle for Meaning and the Corporate Image discusses these “how-to’s” in detail.

I’ll keep you updated on the publication of the book.

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“Liberal” Access to the Proxy

In a recent Wall Street Journal article, authors Clark Judge and Richard Torrenzano discuss anticipated changes to U.S. Securities and Exchange Commission (SEC) rules which will allow more stockholder freedom of access to the process of corporate resolutions via the annual proxy.

Is this a new threat to corporate strategy?

Is this a new threat to corporate strategy?

Briefly for those of you unfamiliar with this process, annually corporations have their owners (stockholders) vote on various proposals, foremost of which is the selection of the members of the board of directors.

Per the article, these rule changes would allow various stockholders, or groups of stockholders, to nominate individuals for board seats. That nomination process would be at the expense of the corporation and would, again according to the article, create a campaign and election process much like that of any political election we see staged before us every November. It’s forecasted that this process will create more intense debates over various issues before society, offering groups with political agendas such as those of global warming and sustainability, the opportunity to place their candidate of choice on a corporate board. By definition, that candidate of choice would be a candidate who answers to a political constituency, instead of just a constituency of investors, i.e., owners.

A process such as that outlined above would give a clear advantage to activist groups for the placement of their own candidates on a targeted corporate board. This is an advantage which is not currently enjoyed by any activist group. And SEC rule changes such as those proposed above will go a long way to affording more power to activist groups.

But is this just another wrinkle in the everyday ebb and flow of activist vs. corporation? After all, activists and corporations have been wrestling for years. Well, yes, it’s possibly a new wrinkle. But I think this wrinkle is more wrinkly than most that have come before it. Why? Well, the article makes the point that, of course, corporations have always had to deal with multiple stakeholders, stakeholders which activists have traditionally claimed to represent. But the article points out something which is the theme of this blog. That theme is that the current environment in which corporations now need to deal with multiple stakeholders, led by activists, is very different. And one of those factors of difference is social media.

Another recent Wall Street Journal article amplifies this point about social media’s place in the new corporate activism. For example, in this article by Cari Tuna, it is pointed out that a new social networking site, MoxyVote.com, aggregates “advocates” and individual shareholders so that discussions about various proxy initiatives may be made. The effect of which helps activists to present their position to a group of selected shareholders in a socially-supporting environment.

In her article, Cari Tuna also mentions similar sites which allow advocates and individual investors to engage in political conversation regarding proxy initiatives. One such similar site is TransparentDemocracy.org. This site allows individuals and organizations to post corporate proxy and corporate government election recommendations. Then there is Us.ProxyExchange.org which endeavors to create an exchange via which investors in voting blocs may transfer their proxy to other stockholders. The power of these types of sites for activists is obviously clear.

Such sites enable the activist organization to enter into the corporate proxy process in much the same way that they already enter into the general political process. And the existence of sites such as MoxyVote.com, etc. do much of the organizational work for the activist. Sites such as these present the activist group an audience of previously hard-to-reach individual investors all wrapped up in nice, neat package. And all at no, or virtually no, expense.

Democracy is good, yes. I’m all in favor of individuals becoming more active in their proxy voting process and I have indeed encouraged people to do so in articles I have previously written. Yet, what concerns me in this proposed corporate social media-massaged cyber-democracy is that the interests of the individual stockholders, i.e. the owners, can be substituted for that of stakeholders. This would be very much like that where we have the interests of individual citizen voters replaced by that of one of the two major political parties.

In this proposed model, as Judge and Torrenzano pointed out in their article, the proxy process becomes one that is “about placing people on boards who answer to constituents, not investors.” Such procedures have the potential to decrease the importance of capital ownership and reduce it to nothing more than a political process usurped and co-opted by special interests.

And don’t we have enough of that already?

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Leftists and Big Business . . . Strange Bedfellows.

Activists and companies used to fight like cats and dogs. Apparently, that cliche can no longer be used as a rule.

woman working in bed uid 10Per a recent opinion column on FoxNews.com, groups traditionally seen as left-leaning are getting together with big business and government to hammer out environmental policy.

Hey. What happened to the rights of the voter and the shareholder in determining environmental policy?

According to the Fox News article written by Tom Borelli, the coalition We Can Lead is a broad-based coalition of activist groups and energy and technology companies.  Among the companies in the coalition are Hewlett-Packard and Duke Energy.  Among the left-wing activist groups, reportedly, are CERES and the Apollo Alliance.  The former is reported to be a coalition of investors and labor/environmental organizations that push companies to further environmental policies. The latter is reported to be a coalition of business, environmental, labor, and community leaders.  The board members of the Apollo Alliance are according to the article members of the United Steelworkers and the Service Employees International Union (SEIU).

In the race to look more “green” than their competitors, companies are throwing in with activists and, as Borelli pointed out in his article, after years and years of fighting the activists, companies have apparently decided to “switch rather than fight,” in a take-off of the old Tareyton cigarette commercial.

Okay. Ecology is good. I’m not in favor of wrecking the Earth. But is all this action on behalf of Mother Earth really necessary? And who decides if it is necessary? Who decides if the decisions made and campaigns pursued by We Can Lead are the right way to go? The left, in social media, likes to support the concept of crowd-sourcing, democracy in action via new technologies. But do we see any truly democratic action from groups like We Can Lead on behalf of the people for whom they ostensibly act?

Where do the shareholders, the owners, of Duke Energy and Hewlett-Packard stand on the issues for which We Can Lead advocate?

Where do the constituents of the politicians who We Can Lead lobby stand?

And who told We Can Lead that they could lead? Yes, they can lead. But who told them they could or should?

And has anyone given any thought to what the throwing in of the green does to the economic process?

Leftists and big business . . . now that’s a dangerous combination.

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Donated Ad Space for the Social Good?

In an article in today’s Ad Age Digital, Allison Mooney discusses the advent of ad networks dedicated to the “social good.”

She starts off her article by saying, “Now that President Obama has issued a call to arms for activism . . . “Antique cash machine uid 13 Well, that’s not actually what the president is calling for.  What he is calling for is an increase in volunteerism (and he’s not the first president to do that, by the way), not activism.  Volunteerism and activism are two very different things. But her lead-off sentence does get one’s attention.

Allison continues her article and segues this idea into news about the creation of Publishers With a Purpose, a consortium dedicated to “encouraging Web site publishers to pledge 5% of their total ad inventory to selected nonprofits and social causes, with the shared goal of simply doing good.” Uh-huh. On the surface it seems like it’s all good, but let’s dig deeper.  Let’s get past the all warm and fuzzy stuff.  There are at least two things about this idea that concern me. In no order of importance:

1) “Selected nonprofits and social causes.” Who selects these non-profit organizations which will be the recipients of the web site publishers’ largesse?

2) “The shared goal of simply doing good.” Who says that the selected organizations are “doing good?”

Prior to the creation of such a network, non-profits had to earn “economic votes” in order to have the money to place ads at all.  Those economic votes were in the form of donations “democratically” given by a constituency of thousands or tens of thousands. The nonprofits’ ideals were therefore vetted by many, many people.  But with the creation of such an ad network, the nonprofits now do not need to gain those democratically awarded economic votes.  The vetting process is severely impaired.  The nonprofits simply have to convince the small constituency of Publishers With a Purpose that the ideals of the nonprofit have merit. Sounds like a concentration of power.

Such power can have negative impact on business.

Not all nonprofits have an idea of social good that everyone would agree with. And, indeed, many ideas that may be listed under the “social good” label, may have negative effects upon business, creating inefficiencies and costing jobs. A loss of jobs can never be considered to be for the “social good.”

By giving 5% of ad space to such organizations, business may actually be giving organizations who compete with business more strength, adding to the power of a class of business competitor that I call “irregular,” i.e., not your usual garden-variety type of head-to-head competitor.  And by awarding that strength, participating publishers may actually help consolidate market and social power within the hands of fewer individuals.

Allison wraps up the article by saying, “sounds like a great way to further corporate social responsibility efforts.”  Yes.  It certainly does.  But all corporate social responsibility efforts are not necessarily worth furthering simply because they are labeled as such.

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Sociological Hacking

Here’s a link to a really great resource about guarding against what I call sociological hacking.  Others call it social engineering, not the kind that the government tries to foist upon us, but the kind that hackers employ to get through the weakest defense of a computer network, the human mind.

The European Network & Information Security Agency has produced a great overview of the problem that presents itself in social networks: people masquerading as others to get into your friend or professional network.  Well, you may be thinking, “So what? What harm could that do to me?”  Probably nothing if you kept your virtual mouth shut.  But that’s not what social networks are about, are they?  SNs are about opening up and advising your friends and co-workers on you status, latest thoughts, latest activities, future activities, business trips, interactions with that guy or gal in the next cube, etc.

If there is someone in your network who’s not really who they claim to be, you might just be giving them juicy tidbits that they might be able to leverage against you.  Like what?  Well, like your birthdate for one.  Put that little tidbit together with other personal info that’s even easier to surf and voila you might just have yourself a nasty case of identity theft.  Or perhaps you like to update all on your travel status, taking a business trip here or there, or some personal time at some other location.  In certain circumstances, giving us that TMI is like putting a sign on your house saying, “Hey all you Nasties out there, there’s no one home here.”  A little, or perhaps a lot, of discretion should be practiced.

Well, anyway, check out the link and you’ll get a better picture of what I mean.

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Social Media as “Pull” Propaganda

This is no April Fool’s joke.

In a recent post I wrote about the potential for social media, or rather social media content, to be used as propaganda.  It’s a definite possibility.

There’s another thought that I want to add to my theory in this area.  Normally, we think about propaganda as being “pushed” at us.  You turn on the TV, open the newspaper (Yes, Virginia, there still are newspapers, at least for now.), pick up a magazine, and there it is.  You don’t need to live in the classical dictatorship to experience propaganda.  It’s everywhere.

In these cases, propaganda is pushed at us.  We don’t actually seek it out.  When we pick up that paper or magazine or turn on the TV we might actually be seeking something else, but are made to settle for what’s presented to us.  Not so with social media.

With social media, we actively seek out the topics we want.  We head to the sites with the skewed information that will tickle our fancy.  We don’t settle; we select.  We’re pulled to what might be just a polemically slanted view on something that only serves to further the writer’s own personal causes.  Or, it may have a larger impact than that.  What we select from, we all know, is not always true and often supports one point of view or the other.  That’s part of what social media is about, freedom of information and freedom of selection.  But social media is also becoming about the freedom to delude ourselves.

It’s the “pull” propaganda phenomenon, representing a major shift in how we deal with our world.

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OMG . . . Could social media be propaganda?

There’s a great book on the idea of propaganda.  It’s titled, quite cleverly ;-) , Propaganda, and subtitled The Formation of Men’s Attitudes.  Now, this is a really great book.  It’s a classic work in the theory of communication.  I’ve had this book in my library for quite a while, since I read it as a college sophomore taking his first course in communications.  This book is somewhat “thick” in its 1962 writing style, but if you can stay with it the book can greatly enlighten you into the basics of communication, and help you understand just what propaganda really is and how it can affect people.  Keep in mind that the author’s primary focus is in the area of political communication.  My focus is in the area of communication for commercial purposes, but we can still use Propaganda as a jumping off point for the effect that social media is having upon business.

Written by Jacques Ellul, the author talks about ten factors that need to be present in order for propaganda to be effective.  When I reread these factors recently, it was very interesting to see that many of them can be applied to social media.  Let’s just discuss one for now.

For his first factor, Jacques says that to be successful propaganda needs to address both the individual and the masses at the same time.

This seems curious.  Why would he say this?  Jacques explain his reasoning by saying that the individual is of no interest to the propagandist because “as an isolated unit he presents too much resistance to external action.”

He goes on to say that propaganda looks to reach persons who are participants in a group, meaning those that possess common interests.  The propagandist wants to target individuals in a group because, per Jacques, the group is bound together by emotionalism, impulsiveness, and excess, and as such they are considered as not being “alone.”  The propagandist leverages this group relationship and dynamic and uses it to exert influence on each individual and ultimately the group.

Think about this.  Really think about this.  It appears that Jacques is describing an environment which is much like social media.   Social media address the individual from within a group. Social media is both a tool of mass communication and one of individual communication.  It is “mass” because its public messages can be read by anyone with access to the Internet.

Yet social media’s communications are also individualized because:

1) they are often addressed to persons taking part in a community of common interest (the topic area of the blog or social network) and, as such are somewhat specific and not general in nature; and,

2) because a feedback loop is provided (e.g., the comments in a blog) a conversation can be created between the site author and each reader, individually.  (In reality, a conversation between the author and each reader is probably impractical, yet it is possible.)  Commenters may even address each other, providing ample opportunity for sub-currents of propaganda.

Many of these comments are created in an air of emotionalism and impulsiveness created by the nature of the social medium itself, anonymous, free-wheeling, open, and candid.  Note that Jacques said that this type of group atmosphere is a factor in exerting influence on the individual.  ( I bolded those words above for easy reference.)  So what’s this mean for business?

It means that yes, of course social media could be used as a propaganda tool.  Any communications medium, when placed in the “wrong” hands, can be used to “distort” an image or meaning.  Surely, much of that is done, and has been done, in the “traditional” media.  Just check with the lunatic fringe.  They’re very anxious to discuss their theories on that.

But seriously, with such a tool as social media in the hands of millions of people, most of whom never had a writing or research lesson in their lives, a serious risk is posed to businesses every day.  How do businesses minimize this risk?

They gotta get in the game.  Get in the game.

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