Recently, the popular press has been filled with a number of articles that question whether social media sites like Facebook and Twitter are appropriate channels for releasing material operating information.  Many of these have appeared in the wake of the Security and Exchange Commission’s release of an investigative report on Netflix.  But how can we forget the numerous cases almost two decades ago of companies disclosing significant non-public information to analysts and/or “selected” investors before making full disclosure of the same information to the general investing public?  How could we have become so desensitized to insider trading threats?  

Well, this Grumpy Old Accountant is still bitter about past management reporting abuses, and sees today’s social media as creating new risks for financial reporting transparency.  Most of today’s social media pundits have failed to address the advantages and disadvantages of using specific social media tools for distributing financial and operating data to the markets.  Is one tool better than another for insuring transparency?  Could social media be the latest mutation of the “selective disclosure”  virus?

To address such concerns, I penned the following article for Corporate Finance Insider, a publication of the American Institute of CPA’s.

Is social media worth the risk for reporting earnings?

Three guiding principles for companies to consider as they weigh using a blog, Facebook status update or tweet to send out material information.

June 6, 2013

It is now the norm for public companies to distribute financial, regulatory, and stock-pricing data to the markets via investor relations sections on their corporate websites. In fact, many analysts and investors actually prefer such websites to the SEC’s EDGAR tool because investor relations sites often present downloadable data in a variety of formats, from PDFs, to Excel to HTML. So common is this medium that many consider it a “red flag” when a public company does not provide such information access.

The recent Netflix experience sparked debate on a different form of digital delivery of material information—the role of social media. Netflix CEO Reed Hastings last July posted, on his personal Facebook page, company operating data that had not previously been reported in a press release, Form 8-K, or on the company’s website. The SEC initiated an investigation and recently issued a final report (Release No. 69279), in which it decided not to pursue an enforcement action. Yet, the securities regulator did emphasize that social media communications require “careful Regulation FD analysis,” and that investors should be alerted to how companies plan to use social media channels to distribute information.

The Regulation FD issue has its roots in the SEC’s attempts to curb insider information at the turn of the 21st century. So, the real question today is not whether social media is “good or bad,” but whether these channels might actually contribute to “selective disclosure” that might promote trading abuses. This article suggests three guiding principles for companies considering social media for releasing material information: simplicity, caution, and control.

Where are we today?

While Twitter, and even Facebook status updates, may convey more timely data, it is at a potentially high cost. Message length limitations combined with the speed with which tweets and updates are generated may detract from decision usefulness, relevance, and representation faithfulness. 

Additionally, a recent study questions whether corporate managers are really ready to use social media to distribute operating data. A report issued by Stanford University’s Rock Center for Corporate Governance in conjunction with the Conference Board found that most companies appear to be relatively unsophisticated when it comes to formally gathering data from social media and incorporating them into corporate strategy, operational plans, and risk management. Why then would anyone expect them to be sophisticated in terms of how they use social media to disseminate data? The study also acknowledged the potential for misinformation in the market when information shared among social media users is not verified.

Despite its global following of more than 1 billion users, Facebook has not been used much to distribute corporate performance updates despite a high character limit (more than 63,000) for “status updates.” However, a number of companies have taken to blogging to distribute information. Dell, for example, uses its DellShares blog site to provide “new insights and perspectives into Dell and the world of investor relations.” As shown below, Dell also uses this blog to report quarterly earnings information and related commentary.

Corporate blogs generally appear to be valid means of distributing operating data as long as the disclosures are complete representations of what a company has reported through press releases and Forms 8-K. In short, blogs appear to be useful “supplements” and possibly even “substitutes” to a company’s traditional financial reporting channels, as long as they meet the SEC’s most recent social media guidance issued in August 2008 (Release No. 34-58288).

However, a handful of companies recently have begun using Twitter as an information distribution channel for operating data. For the month ended April 2013, Dell, eBay, and PepsiCo reported a significant number of followers and posting volume:

  • Dell has two Twitter accounts: @Dell for official news and tweets and @DellShares for information and insight for the investor community. @Dell had more than 68,000 followers and more than 2,600 tweets, while @DellShares had far fewer followers (almost 5,500) and tweets (fewer than 800). 
  • eBay’s official Twitter news feed, @ebayinc, had more than 14,000 followers and 10,000 tweets.
  • PepsiCo’s official home on Twitter, @PepsiCo, had almost 83,000 followers and more than 17,000 tweets.

But as last year’s Netflix case suggests, the emerging use of social media channels such as Twitter and Facebook are not without their own unique set of challenges. A strength of these communication channels is undoubtedly the speed with which data can be transmitted to “followers.” However, the SEC’s concern is whether the number of Twitter “followers” is sufficiently large as to ensure “non-exclusionary” distribution of information. In the cases of Dell, eBay, and PepsiCo, it is unlikely today that Twitter could replace the companies’ traditional information distribution channels.

The quality of information posted on Twitter also raises questions, given its maximum message length of 140 characters, which necessitates the use of numerous postings to communicate a message. Look at the numerous tweets posted by Dell in a recent earnings release:


These tweets prompt one to wonder if the intended message was communicated completely and accurately. Also, remember that Dell has two Twitter accounts. Did investors know which one to follow for the earnings release? One is left wondering why it was so important to “rush” this limited information disclosure to the market. The author prefers eBay’s approach, which used Twitter to warn investors of an upcoming earnings release and provided a link: 

Later, when the company did report selected information, it also warned followers that its tweets were not complete:

The above tweets suggest that eBay explicitly considered not only Regulation FD, but also Regulation G, which deals with the reporting of non-GAAP financial metrics. This suggests regulatory compliance might actually be complicated by the use of social media. 


The old adage says, “If it ain’t broke, don’t fix it.” If the corporate investor relations page is getting the job done, there’s probably no reason to change it. For unsophisticated and/or resource-constrained companies, it is probably best to stick with the investor relations page as the primary information distribution tool. The more adventurous corporate social media users might consider blogging, but only after linking content to corporate investor pages. If a company needs to quickly alert the market to a fresh piece of operating data, it might consider using an occasional tweet or status update that directs followers to a link to the appropriate corporate webpage. 


When it comes to today’s developing social media, two sayings seem particularly appropriate: “speed kills” and “haste makes waste.” SEC disclosure guidance in this area is developing, and corporate tweets and Facebook status updates are likely to attract regulatory scrutiny. Corporate executives need to do a cost/benefit analysis and ask themselves whether a brief corporate announcement is worth the potential legal and regulatory headaches that it might create. Again, if Twitter, Facebook, or the like must be used to alert markets, simply announce that new data is available at the corporate website, and include a link to it. 


Companies need to control their social media technologies. At a minimum, they need formal governance and control procedures to ensure accuracy, completeness, and regulatory compliance. This does not need to be that complex. A simple start would be to have any corporate-related social media “burst” reviewed and approved by an appropriate authority who could ensure compliance with applicable company and regulatory guidelines. This might slow down the marketing department a bit, but, as noted above, “speed kills.” 

The potential regulatory compliance and information accuracy risks associated with social media information distribution are simply too great and clearly outweigh any benefits that a quick tweet or status update might provide. Focus on simplicity, caution, and control when using social media for distributing company operating information.

This essay reflects the opinion of the author and not necessarily that of The American College, or Villanova University.

AuthorAnthony Catanach

Can ethics be taught?  As an accountant, and an aging one at that, I am not qualified to answer this question.  But Socrates debated this very question with his fellow Athenians almost 2,500 years ago.  And his conclusion then apparently was that it could be.  But then again, Socrates had not met Sam E. Antar.  

This past week I spent several very entertaining and interesting days with Sam E. Antar who profoundly affected the way I view white-collar fraud, and the ability of auditors to detect it.  Did he “con” me?  Was I another one of his unwitting victims?  Perhaps, but I now realize that accounting and auditing professionals are particularly at risk to “crooks” like Sam.  But before I share my observations with you, a bit of background is in order.

Business ethics training is clearly a big deal today, its increased importance largely the result of recent high profile corporate failures, and regulatory attempts to prevent their reoccurrence.  Just look around you.  Most business schools now have required ethics courses for both undergraduate and graduate students.  Ethics education requirements also are now the norm for the licensing and certification of both financial and management accountants.  In fact, these new ethics training rules have prompted many professional associations to create a “new ethics training industry” to meet the continuing professional education (CPE) needs of their members.  

But does any of this work?  Despite their having taken semester-long ethics classes, I still catch students cheating on exams and course assignments.  What does this tell us?  And then there are the numerous ads for “free” or “cheap” on-line training courses.  This Grumpy Old Accountant is beginning to wonder whether the professional organizations that promote these CPE programs have actually taken their own courses.  Just how much ethics can one learn in an on-line course in a couple of hours?  After all, don’t you get what you pay for?  And some of you will no doubt remember the Grumpies’ rants about how “the large accounting firms have effectively demagnetized the profession’s moral compass,” in “Accountants Behaving Badly.

So what’s the problem?  Philosophy professor Joseph R. DesJardins defines it clearly when he acknowledges that teaching ethics is simply a “difficult task.”  And  I agree with him completely, while believing that training offers only a partial solution to the increasingly complex ethical dilemmas we face in accounting today.  Cultural reforms and enforcement cannot be ignored either.  There is just no quick fix…and apparently Crazy Eddie’s former auditor doesn’t believe any remediation is in order to address their “rogue” auditor’s recent behavior.  But I digress…

So, where does Crazy Eddie come in you ask?  This past week I decided that “desperate times call for drastic measures,” particularly when it comes to trying to convince my graduate accounting students that ethical and transparent financial reporting and effective auditing are important.  Who better than a convicted felon and mastermind of one of the largest securities frauds in US history to “lecture” my students on white-collar fraud. Yes, Sam E. Antar, former chief financial officer of Crazy Eddie, who has admitted to such inappropriate behaviors as skimming, money laundering, and insurance and securities fraud.

Now let’s be clear…Sam has made numerous speaking appearances to a wide variety of organizations and students, and consults regularly with governmental agencies on white-collar fraud.  So, apparently this is how Sam “makes a living” these days (at least we can only hope).  But spend a couple of days with this former criminal, and you’ll find out that he is not just another consultant spewing out the purported benefits of the Cressey “fraud triangle.”  What makes this man unique (and dangerous) is his complete lack of remorse for his past crimes.  In his own words:

Apologies for my crimes are irrelevant. Apologies do not undo the losses suffered by the victims of my crimes. I do not seek or want forgiveness for my crimes from my victims.
— Sam E. Antar

And it is ironic that this lack of remorse is viewed by some accounting professors as deplorable, making him unfit for the classroom.  Perhaps that’s why he has never spoken to the American Accounting Association, the professional organization for accounting academics.  On the contrary, this is exactly the type of person our accounting faculty and students need to meet and question: a predator, a charmer, a scammer.

Yes, it was fascinating to relive the Crazy Eddie accounting frauds (and they were numerous), particularly since I was a KPMG auditor (Crazy Eddies’ firm) during the public company phase of the Antar family’s scam.  It was interesting to see how the Antar “crime family” adapted its business model to strategy changes from skimming as a private company, to inflating profits as a public company, all in pursuit of the “game.”

Imagine just how corrupt the family was, that it even sent young cousin Sam to business school to learn accounting for the public offering phase of the Crazy Eddie fraud.  Oh, and by the way, Sam was an honor student in accounting, and passed all of the CPA exam in his first attempt.  Here are a couple of questions for you…if Sam had taken an ethics course in college, what grade do you think he would have earned?  Do you think the class would have redirected him from a life of crime?  The answers to both queries are pretty obvious, right?

Nevertheless, here are some of the very troubling insights that I took away from my two-day “retreat” with Sam.  First, and probably the most disturbing, is that 10 percent of the public is absolutely unethical and incapable of behavioral change.  In making this claim, Sam cited a study by Crowe Horwath, and pointed out that Cressey’s “fraud triangle” does not account for such individuals, since they do not (or even need) to explain or justify their behavior.  This “evil” 10 percent simply like what they do, and don’t need to rationalize. As Gordon Gekko noted in the movie Wall Street: “It’s not about the money…it’s about the game.”

What are the implications of Sam’s sobering assertions?  If he’s right, ethics education may be pointless for this “criminal” element of our society.  Equally troubling is that this 10 percent is quite likely to be attracted to the capital markets (as was Gordon Gekko), like a “moth to a flame.”  This means that accountants and auditors will undoubtedly encounter these individuals at some point during their careers.  This Grumpy Old Accountant worries that today’s accountants and auditors simply won’t recognize the “devil” when they meet him or her.  Why you ask?

My second big takeaway from Sam was how white-collar criminals operate.  Exploitation and façade accurately describe the way they function.  According to Sam, this evil 10 percent exploits your humanity.  They take advantage of your ethics, morality, and good intentions.  The more ethical and moral you are, the easier it is for the scam artist to con you because you simply can’t believe that people act inappropriately, or contrary to your own personal moral code.  In short, you are “ripe” for exploitation.  

What does this mean for our young, impressionable, idealistic accountants entering the profession?  They are like “lambs to the slaughter.”  They generally come from good schools, moral families, and most have been raised to believe in the good in people. They are clearly incapable of dealing with the likes of Sam Antar, particularly when he employs two other tools of the white-collar criminal: flattery and distraction. 

Complementing a person’s appearance or intelligence lowers the victim’s defenses. Will auditors (both junior and senior) recognize that this is happening? And distractions can be particularly effective in reducing audit quality.  Sam reports that as CFO one of his goals was to get his auditors off schedule by pushing 80 percent of their audit work into the last 20 percent of their scheduled audit time.  The result: either more errors in the test work performed or procedures would be scrapped altogether for the sake of completing the audit as scheduled. Do our auditors today consciously think about such things?

As a side note, Sam suggests that accountants with “street smarts” probably would make better auditors.  Given their “inner city” backgrounds they have been raised around the criminal element, are less trusting, and are more likely to recognize when they are being scammed.  This observation may just highlight another crack in the large accounting firms’ audit models, given that they hire almost exclusively from the top business schools, where “street smarts” is neither on the admission criteria or in the curricula.

Finally, there is the white-collar criminals use of façade.  These evil-doers routinely cloak themselves with an aura of “false” integrity to gain the trust of their victims.  For example, they may be well respected “pillars of the community” known for their charitable contributions, or even recognized by industry professionals for their accomplishments.  The façade makes it less likely that someone will question their actions and behaviors.  When it comes to auditing, how likely is it that today’s large accounting firm auditors will challenge their famous big-shot clients?  Do we really expect them to “bite the hand that feeds them?” So, what is Sam Antar selling today?  Is he all about improving ethics in today’s society?  Is his goal to improve auditing and fraud detection?  Or is this all some clever new façade to gain our trust?  I don’t know, and frankly, I don’t care!

All I do know is that two days with Sam Antar left me with more questions than answers.  This convicted felon is causing this Grumpy Old Accountant to reevaluate his positions on a number of issues:

  • What is the “best” way to prepare our accounting students for dealing with the ever increasing moral lapses found in business today?
  • Can regulatory intervention like Sarbanes Oxley really make a difference when it comes to the evil 10 percent?
  • Should auditors be focusing more on detective controls and substantive testing than preventive controls?
  • How can large accounting firms effectively promote auditor skepticism when they simultaneously differentiate themselves as “valued business advisors” to their audit clients?

In short, are today’s accountants and auditors really ready to deal with white-collar criminals?  Again, did Sam Antar “con” me?  Perhaps, but at least I now recognize the possibility.


This essay reflects the opinion of the author and not necessarily that of The American College, or Villanova University.

AuthorAnthony Catanach
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