STANFORD GRADUATE SCHOOL OF BUSINESS Social Media Use Among Directors and Senior Managers David F. Larcker

Edelman survey, marks the first year that “listening to customers” is considered equally important as providing “high quality products or services” to building trust in a corporation According to BRANDFog 2, consumers expect to be able to engage with companies and their brands through social media. Similarly, employees prefer to work for a company that is active in social media Firms that embrace Web 2.0 (social technologies) and social media are more likely to be market leaders, have their market share increase, and use management practices that lead to higher margins (McKinsey calls these firms “networked enterprises”). 3 Social Media Seems Extremely Important 1 STANFORD GRADUATE SCHOOL OF BUSINESS

FedEx 2 STANFORD GRADUATE SCHOOL OF BUSINESS 4

Apple 3 STANFORD GRADUATE SCHOOL OF BUSINESS A $12 Billion Move In Apple Stock Seems To Have Started With Tweets From A Single Anonymous Source In China 5 The organization that got the news in the headlines is a group called Chinese Labor Watch which said it got its information from "workers," but its press release was mostly cribbed from the tweets of just one person.

Comcast MILLION VIEWS

Comcast Response 5 Frank Eliason “Frank Eliason: Helping Comcast suck a little bit less” “I can give full kudos to Frank for being so personable, and as much as it pains me to say it, I have to acknowledge Comcast as a whole for bringing customer service to the digital age.” 7 BusinessWeek: “I think it's safe to call Comcast's Frank Eliason the most famous customer service manager in the U.S., possibly in the world.”

What do senior executives and board members really know about (personal and business uses of) social media? Is social media information incorporated into strategic decisions and risk management at the highest levels of organizations? Do senior executives and board members monitor and evaluate processes for collecting and analyzing social media data within the firm? What is the precise “value proposition” for social media? Are there compelling analyses that expenditures on social media are value increasing for shareholders? Some Obvious Questions 6 STANFORD GRADUATE SCHOOL OF BUSINESS

Only CEOs, senior-level executives, and board members Typically in their mid-50’s Across a broad set of industries – manufacturing, utilities, banking, and services Fairly large companies -- > $500 million in revenue Our Survey 9 7 STANFORD GRADUATE SCHOOL OF BUSINESS

“…a social trend in which people use technologies to get the things they need from each other, rather than from traditional institutions…” (Groundswell) It’s really about the relationships and the innate human desire to connect, not just the technologies Social media is not just a channel, it’s a conversation that:  is very big  highly influential  will go on regardless of what a firm does  If ignored can cause real problems (or missed opportunities) Social media deserves serious research effort Our Perspective on Social Media 8 STANFORD GRADUATE SCHOOL OF BUSINESS

Basic Social Media Knowledge 9 STANFORD GRADUATE SCHOOL OF BUSINESS

Basic Social Media Knowledge 10 STANFORD GRADUATE SCHOOL OF BUSINESS Pretty High for 2012

Basic Social Media Knowledge 11 STANFORD GRADUATE SCHOOL OF BUSINESS However, mostly Spectators (read blogs, follow others, etc), as opposed to Creators (create blogs, publish Twitter updates, etc.) Substantial overlap between personal and professional usage

Understanding the Impact of Social Media 12 STANFORD GRADUATE SCHOOL OF BUSINESS Not Great! Marketing and Branding Customer Outreach Collaboration and Info Sharing Organizational Risk

Do They Use the Information? 13 STANFORD GRADUATE SCHOOL OF BUSINESS Maybe! Mostly Marketing and Sales

You Get What You Measure 14 STANFORD GRADUATE SCHOOL OF BUSINESS

You Get What You Measure 15 STANFORD GRADUATE SCHOOL OF BUSINESS Not collected Not valuable Too low level

Many Firms Do Not Even Have Guidelines! 16 STANFORD GRADUATE SCHOOL OF BUSINESS

Executives and board members have some understanding about social media for personal and (in some cases) professional applications They understand the potential for social media to impact their firms in both positive and negative ways However, they have not been convinced about the value proposition of social media  Social media information gathering and analysis is in its “infancy”  Social media data is difficult to distill into a useable format  Possible serious selection bias with social media respondents Executives and board members may view social media as “beneath them” and is only for marketing or public relations Some Preliminary Takeaways 17 STANFORD GRADUATE SCHOOL OF BUSINESS

Edelman Trust Barometer 2 BRANDfog, 2012 CEO, Social Media and Leadership Survey, 2012 ( 3 Jacques Bughin and Michael Chui, “The Rise of the Networked Enterprise: Web 2.0 Finds Its Payday,” McKinsey Quarterly, December Available at: ( Organization/Strategic_Organization/The_rise_of_the_networked_enterprise_Web_20_finds_its_payday_2716?pagenum=2). 4 goobie55, "FedEx Guy Throwing My Computer Monitor,” YouTube, Web, December 19, 2011, goobie Nicholas Carson, “A $12 Billion Move In Apple Stock Seems To Have Started With Tweets From A Single Anonymous Source In China,” Business Insider, October 11, 2012, started-with-tweets-from-a-single-anonymous-source-in-china started-with-tweets-from-a-single-anonymous-source-in-china ; march1.jpg; Casey Rae, “On Comcast and NBC Universal,” The Contrarian, December 10, 2009, ; DoorFrame, “A Comcast Technician Sleeping on my Couch,” YouTube, Web, June 20, 2006, march1.jpg 7 Melanie Seasons, “Eliason: Helping Comcast suck a little bit less,” Fake Plastic Noodle blog, August 5, 2008, Rebecca Reisner, Comcast's Twitter Man, BloombergBusinessWeek, January 13, 2009, David Larcker, Sarah Larcker and Brian Tayan, “What Do Corporate Directors and Senior Managers Know about Social Media?”, The Conference Board Director Notes, October 2012, Survey conducted jointly by Stanford Rock Center for Corporate Governance and The Conference Board. Copyright © 2012 by David F. Larcker. All rights reserved. For permissions, contact: Citations 18 STANFORD GRADUATE SCHOOL OF BUSINESS