CEO Bloggers? Bring it On.

Let me start by saying that Jonathan Schwartz, CEO of Sun Microsystems, is a dude. He wants to break the shackles of traditional disclosure and the cartel of the wire services in order to bring better, faster, easier-to-access information to his investors. This was reported in Bloomberg yesterday, pieces of which are provided here. As usual, I have highlighted particularly interesting portions of the article. Please ask yourself this question as you read the article: do you see any self-serving comments and/or the footprints of technical luddites in the text?

Oct. 4 (Bloomberg) — Sun Microsystems Inc. Chief Executive Officer Jonathan Schwartz has asked the U.S. Securities and Exchange Commission to let him announce news about his computer networking company on his personal blog.

“If we have material news to disclose, we have to hold an anachronistic telephone conference call, or issue an equivalently anachronistic press release,” Schwartz wrote in his online diary on Oct. 2. “I would argue that none of those routes are as accessible to the general public as a blog, or Sun’s Web site.”

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Allowing companies to make announcements in a blog might rekindle concerns that some shareholders are being left out of the loop, said Patrick McGurn, executive vice president at Institutional Shareholder Services.

“Once you start going to unofficial forms of disclosure, you create the risk of giving advantages to certain investors,” said McGurn, whose Rockville, Maryland-based firm advises clients on proxy votes. “It would raise the potential that people could be tipped to the impending appearance of the information.”

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The SEC rule requires that companies make announcements about topics including profits, new products and mergers in a filing with the agency or in a press release so that all investors can learn of news simultaneously. When the proposal was passed, the SEC said in 2000 that posting information on a Web site would “not by itself be considered a sufficient method of public disclosure.”

“As technology evolves and as more investors have access to and use the Internet, however, we believe that some issuers, whose Web sites are widely followed by the investment community, could use such a method,” the agency said.

Schwartz’s Sept. 25 letter to SEC Chairman Christopher Cox said Sun’s Web site should fulfill disclosure requirements, because it attracts almost 1 million “hits” a day. Michael Dillon, general counsel of the Santa Clara, California-based company, wrote in a separate blog that the Internet is the most effective means of “timely dissemination of information to the widest possible audience.”

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“Disclosing information on the company’s Web site should be sufficient,” said Michael McCoy, a former attorney in the SEC’s corporation finance division now in private practice at Bryan Cave LLP. “It’s reasonable to assume that an investor in a company would be just as likely to read the company’s Web site as they would read SEC filings.”

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Michael Lissauer, a spokesman for Business Wire, the No. 2 distributor of press releases behind PR Newswire, said a blog can’t ensure everyone sees information at the same time.

“You need broad and simultaneous disclosure,” said Lissauer, whose San Francisco-based company was bought by Buffett’s Berkshire Hathaway Inc. earlier this year. “You can’t get it by posting something on your Web site or by E-mail.”

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“Assuming that people who are interested in your stock are going to go to your blog is not a good approach,” said Michelle Savage, vice president of investor relations at PR Newswire. “You’re forcing them to say `I’m going to check out every Web site of a company I am interested in and I’m going to look at them constantly.”’

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Intel Corp., the largest computer chipmaker, sought permission to distribute news on its Web site before the SEC approved its rule six years ago. Sun could serve as a sample case, testing the SEC’s resolve to bring an enforcement case over online disclosure now that more investors are using the Internet, said David Martin, a Washington attorney and former head of the SEC’s corporation-finance division.

“Is it satisfactory public disclosure? I think it’s a close call,” Martin said. Sun should take the approach of telling the SEC “we are posting. Come get us,” he said.

Well, ok then. So what’s really going on here:

1. Sun has a CEO who’s not afraid (at least of transparency). He wants closer interaction with his shareholders, his investors and his employees. And the problem with this…..precisely nothing. This is great. Rock on, Jon.



2. Technology has evolved to the point where a blog post or a link to a blog from a company website should be as accessible as a press release. To think this isn’t the case displays either technology ineptitude (ISS?) or pure fear (wire services?).



3. There are entrenched interests that want nothing of this change. Who might that be? I’ll give you a hint - the word “Wire” is at the end of their company names. This is nothing more than unabashed self-interest - they might as well lobby Congress to pressure the SEC not to make such a change (and whose to say this isn’t happening as I write this?).



4. Reporting via blog or website will save money, save time and create a more efficient mechanism for information dissemination. These things benefit company managements, shareholders and analysts everywhere.

There appears to be some pretty linear and defensive thinking displayed in the Bloomberg piece. Let’s review the principal criticisms one by one:

1. Pat McGurn of ISS: What’s up, Pat? Are you kidding me? There is nothing subversive going on here. All one needs to do is for the SEC to say posting on a CEO blog or a company website is “official” and your concern is addressed. So we’re cool, ok?



2. Michael Lissauer of Business Wire: “You need broad and simultaneous disclosure,” and “You can’t get it by posting something on your Web site or by E-mail.” Michael, baby, come on, man. Have you ever heard of RSS? Ping notification? Feed readers? Yahoo!, for chrissake? The internet? How about Mr. Investor, who knows the companies in which he/she is invested, adds these feeds to their feed reader (choose your flavor) and is notified the instant there is new content like, say, a posting related to a disclosable event? Yeah, this really seems like an unfair playing field. Not. Your mind-set is so 1980’s my friend. Step into the 21st century, ok?



3. Michelle Savage of PR Newswire: “Assuming that people who are interested in your stock are going to go to your blog is not a good approach,” and “You’re forcing them to say `I’m going to check out every Web site of a company I am interested in and I’m going to look at them constantly.” Michelle, you disappoint me. Like your cartel pal Michael of Business Wire, learn something about the internet. If the SEC is ever going to enact a rule change permitting internet disclosure they will surely mandate that the relevant pages are RSS enabled (meaning people won’t need to constantly hit “refresh” when staring at a company’s website). Remember, these are the guys that just announced they are spending $54 million on XBRL adoption in order to make it easier for people to access and navigate SEC filings. So put your business card away for a minute and think about what you are really saying, ok? Because it makes no sense.

As I said before, either Luddites or cartel members. Surprise, surprise. If Chris Cox acts in the highly rational and forward-thinking manner that he has during most of his tenure, then he will add this to a list of major changes (a la the XBRL strategy) he is enacting at just the right time. Both the professional investing community and the investing public are ready for this change, and there are no logical reasons for such a change not to occur. Unless politics get in the way. Let’s hope not.