Stakeholder theory posits that it is strategically rational and morally right for corporations to consider the interests of individuals and groups that they affect or are affected by (Crane et al. 2008). Key stakeholders for financial PR professionals include investors, analysts, brokers, the media and The City (Dolphin 1999); therefore a listed company has an obligation to communicate with these key groups – its financial audiences.

Baskin et al. (1997) state that “the first task of financial public relations is to create and maintain investor confidence, building positive relationships with the financial community”. The online environment allows for companies to use forums and create communities, encouraging open and transparent communication; however there are obvious risks attached to doing this in financial PR, not least of all the possibility of breaching rules that govern the sector.

The financial sector is heavily regulated in terms of communication. For example listed companies are obliged to report on their financial performance and immediately notify the market of any developments (timely disclosure of information) and must also treat all shareholders equally (Theaker 2001). Although the internet and developments in communication has meant that investors can all access similar information, it has also brought to light issues of control over information, particularly in terms of transparency.

When considering message transfer online Phillips (2001) cites three phenomena identified by Gregory: transparency, porosity and agency. Transparency is the “deliberate opening of internal systems to people outside the organisation” (Phillips 2001); it “implies openness, communication and accountability” and an example of this is when financial statements can be viewed by anyone (Phillips 2007a). By posting press releases to its website a company allows people outside the organisation and the media to view this information, known as ‘internet transparency’ (Phillips 2007a). For the financial sector ‘institutional transparency’ also occurs, for example the production of financial reports is mandatory and these must be made available to anyone who wishes to see them. The internet has allowed for greater transparency to occur as information is more readily and widely available, however the immediacy and the pervasive nature of the Internet adds to its potency (Phillips, 2001). This creates issues for companies as the PR practitioner has little control over the message and leaked information can reach a wide range of people immediately (Phillips 2001).

Porosity is the leaking of information from an internal source at an organisation to external audiences (Phillips 2001). Although companies can try to limit porosity by monitoring employees this may affect how an employee feels about the organisation and Phillips (2007b) suggests this is not an effective form of control. When this is considered alongside the regulation that information must be made available to all parties at the same time, there are obvious issues surrounding porosity for financial PR. For example, an email containing information about a financial development sent to an external audience may be a breach of this rule.

Agency is the “transformation of a message as it is passed from one person to another” leading to a new understanding (Phillips 2001). Although often not malicious in intent, agency could have an effect on a company’s share price, directly impacting on its shareholders. Horton (2001) suggests that online broadcasting has allowed a malicious side of this to exist on the Internet, such as rumour spreading, stock touts in chat rooms and direct attacks. This means that “the investor relations practitioner today is as much a company defender as company promoter” (Horton 2001) and PR practitioners must attempt to manage these events as they occur online (Phillips 2007c).

Regulations over the financial sector may reduce the opportunities companies have to increase the richness of information and to create community by using tools such as forums, discussions and blog chats, but with such a diverse range of audiences can this medium be discounted? The Internet has undoubtedly eased the ways in which companies adhere to some regulations, but the risks attached also mean that financial PR practitioners need to ensure that an increase in transparency in online communications does not result in issues such as agency or porosity.

 Also available from: http://www.cemp.ac.uk/communities/interactivemedia/interactivemedia/online-pr-in-the-financial-sector-online-financial-pr-part-1

References:

Baskin, O., Aronoff, C. and Lattimore, D., 1997. Public Relations: The Profession and the Practice. 4^th Edition. USA: McGraw-Hill.

Crane, A., Matten, D. and Spence, L., 2008. Corporate Social Responsibility: Readings and cases in a global context. Oxon: Routledge.

Dolphin, R., 1999. The Fundamentals of Corporate Communications. Oxford: Butterworth-Heinemann.

Horton, J., 2001. Online Public Relations: A Handbook for Practitioners. USA: Greenwood Publishing Group.

Phillips, D., 2001. Online Public Relations. London: Kogan Page.

Phillips, D., 2007a. Nature of Transparency. Available from: http://www.thenewpr.com/wiki/pmwiki.php?pagename=DefiningTransparency.NatureofTransparency [Accessed 8 March 2009].

 Phillips, D., 2007b. Internet Porosity. Available from: http://www.thenewpr.com/wiki/pmwiki.php?pagename=DefiningTransparency.InternetPorosity [Accessed 8 March 2009].

Phillips, D., 2007c. Internet Agency. Available from: http://www.thenewpr.com/wiki/pmwiki.php?pagename=DefiningTransparency.InternetAgency [Accessed 8 March 2009].

Theaker, A., 2001. The Public Relations Handbook. London: Routledge.