Fiction becomes fact

Jan 01, 2009
<p>News portals can transmit information at breakneck speed. If that information is wrong or out-dated your company's reputation can take a serious hit</p>

It sounds like the plot of a science fiction film:  intelligent robots wreaking havoc while executives quiver beneath their sheets. Things aren’t that bad, but computers can seriously damage a company’s reputation. Case in point: United Airlines’ stock price collapse in September 2008 after Google presented as new an old story about the airline’s 2002 bankruptcy.

The next day, a journalist with investment advisory firm Income Securities Advisors (ISA) summarized the story. ISA supplies stories to Bloomberg, and when Bloomberg picked it up investors started bailing out of United; in five minutes, the stock dropped 75 percent.

It took a United press release stating the story was ‘completely untrue’ and a brief trading suspension on NASDAQ to calm the situation. News sites also removed the story. When trading resumed, the stock price climbed, but not to former levels.

The problem: the original story was archived without a date on Florida’s Sun-Sentinel site. Google’s news crawler, Googlebot, searched for another date on the webpage where the story appeared. Finding that day’s date, the bot stamped the old story with the new date.

In fairness to the bots, human error was involved. If properly read, the story’s age is pretty clear. The Chicago Tribune, owner of the Sun-Sentinel, used this in its defense, stating in a press release: ‘It appears that no one who passed on this story actually bothered to read the story itself.’

There is, however, no doubt that news aggregators threaten companies. Rapidly produced online news, coupled with automated trading machines, means bad news can destroy a stock’s value in minutes.

So what protection is available? The SEC has an internet enforcement program that investigates cases of online market manipulation. Though an SEC spokesperson would not confirm or deny the existence of ongoing investigations, it is understood the regulator is probing  incidences at United and other companies.

Fast response is vital, says Michael Pranikoff, director of emerging media, PR Newswire. Spending much of his time educating staff at his and other companies about the opportunities and risks of new media, he says, ‘The best thing to do is have a communications plan in place that gives power to one person, allowing things to move very quickly.’

Some service providers advocate putting out a consistent stream of news to prevent a ‘news vacuum’ which could be filled with negative opinions or rumors.

Darin Wolter, vice president of sales, Marketwire, considers another angle: ‘While consistent communications and broad levels of transparency are advocated, it’s important the content is material and newsworthy.’

Though it would be better to stop any erroneous news before it gets out, companies can help by dating information. It’s inevitable the news aggregators will cause problems, however. ‘Unfortunately, nothing is perfect when it comes to Botland,’ concludes Pranikoff.  

Sign up to get stories direct to your inbox
Stay informed on the latest trends and developments in the fast-moving world of corporate governance by signing up for our popular newsletters. Our weekly and monthly updates will provide you with expert analysis, timely updates and comprehensive coverage of regulatory updates, governance trends and best practices, careers and much more.
Cs logo Cs logo