Late last week, respected investor and fund manager Whitney Tilson posted Why We're Short Netflix on Seeking Alpha. In an unusual move, Netflix CEO Reed Hastings responded with his own post called Cover Your Short Position. Now.
Both posts did an excellent job of laying out their respective positions for investors. That said, the whole episode raises two questions that are likely, and definitely should be, on the minds of every c-level executive and director of every publicly traded company:
- Was it a good idea for Hastings to directly address a short-sell in a move that could be perceived as pumping up his own company's stock?
- Is this a new paradigm for CEOs of public companies in the Internet age? Should it be?
Apple's Steve Jobs, for example, is passionate about products and technology, preferring to keep everything else pretty much secretive. So, in the midst of the Adobe Flash controversy, Jobs penned his now infamous open letter "Thoughts on Flash" explaining Apple's position. It worked. Everyone got it. As I explained at the time, that communication strategy wouldn't work for most CEOs, but for Jobs, it was successful.
Whole Foods CEO John Mackey, on the other hand, wrote an op-ed piece in the Wall Street Journal called The Whole Foods Alternative to ObamaCare. That may have been ill-advised and there was, in fact, an initial backlash, but long term, no negative impact whatsoever. In any case, that's Mackey's style and, for him, it works.
Remember, this is the guy who anonymously blogged about himself, his company, and its Wild Oats acquisition on a Yahoo Finance message board. Sure, it was creepy, but I guess that's Mackey.
Back to Netflix: Hastings is well known for being open and conversational with the media. As Lou Hoffman, president of Silicon Valley PR firm the Hoffman Agency once explained to me:
How many execs know that reporters are measured by page views? If you understand that, you appreciate the entertainment factor and the need to give people a fresh, interesting take on things, as opposed to just the company line.The truth is that Hastings was not trying to pump up Netflix shares. He used Tilson's post as a means to share his thoughts on his company's prospects for 2011. It's consistent with Hastings' style that he chose to do it openly, directly, and in my opinion, credibly and with integrity.
Being quotable is a huge issue - especially with big company execs - and it's more important today because of the way the internet has commoditized the news.
Look at Reed Hastings over at Netflix. I worked with him way back at Pure Atria. He was fantastic to work with: conversational, knew how to turn a phrase, knew how to tell a story. Fast-forward to today. Netflix is a well-known, publicly traded company and Hastings is still conversational, can still turn a phrase.
Bottom line: The question of how aggressive should a public company be in terms of communicating with investors is as old as the hills. I've been addressing it with public companies for two decades and, while the communications medium has changed, the basic question hasn't.
These days, as long as it meets SEC Regulation FD (Fair Disclosure) guidelines, it's fair game. After that, it's really up to the specific situation, the personality of the CEO, and the board's appetite for risk and willingness to support new and potentially better ways to do things.
In ten years, all this stuff will probably be run-of-the-mill, but CEOs like Jobs, Mackey, and Hastings will likely be remembered as the ones who broke the mold.
Image courtesy Flickr user advencap