When I first began working at a publicly traded company, the team who managed the media relations around our company’s quarterly earnings never shared information with the broader corporate communications team, even our employee communications team. It drove me crazy, especially as someone working on that employee communications team.
How were we supposed to keep employees informed about the company and its strategy if they were hearing news first from the news media? We always had to scramble to prepare employee communications regarding earnings because we got the earnings news release when the news media got it.
Though this was done out of an abundance of caution to ensure we didn’t violate Securities and Exchange Commission (SEC) rules, the approach always struck me as odd, because it meant that our workforce was usually the last to know about the company’s news coming out of earnings. Over time, this changed as our internal communications team lead worked with our finance team to ensure that some sort of employee communication went out at the same time as the earnings news release.
That approach– sending an employee communications out at the same time as your earnings news release crosses the wire — respects your employees and most importantly, is consistent with the rules of the Securities and Exchange Commission (SEC). (We just made sure that our internal communications lead operated under the same non-disclosure rules as our financial media relations team.)
In the period between the announcement of the IPO and the actual first day of trading — a time known as the “quiet period” under SEC rules — Groupon’s CEO, Andrew Mason, sent an email to all employees criticizing the media coverage of the company leading up to the IPO. All Things D obtained a copy of the email and published it within hours of Mason pressing send. Here’s a key part:
“The degree to which we’re getting the [expletive] kicked out of us in the press had finally crossed the threshold from ‘annoying’ to ‘hilarious.’… I’ll summarize my excitement with four points: 1) Growth in our core business is strong 2) Our investments in the future — businesses like Getaways & NOW — look great, 3) We are pulling away from competition, and 4) We’ve built a great team that I would pit against anyone. In other words, all the stuff that one would want to look good? It looks good.”
Immediately, observers questioned if Mason violated the quiet period rules. Well that was August. Roll tape forward to December. We learned last week from the Wall Street Journal’s Shira Ovide that the SEC is looking into the matter. Check out these two letters from Groupon to the SEC. (They were made public in an SEC filing last week.)
I think this passage from the first letter to the SEC was enlightening:
Certain of the commentary regarding the Company’s business model and sustainability, in particular, has had negative effects on employee morale as well as the Company’s ability to attract and retain employees. In an effort to ease the concerns of its employees while being mindful of the Company’s quiet period restrictions, Mr. Mason sent a confidential e-mail to all of the Company’s employees in North America and senior managers of the Company’s international operations, as noted in the Company’s response to Comment No. 1 above. The purpose of the e-mail was solely to improve employee morale and provide information to employees in response to erroneous media reports that brought into question the integrity of management and the Company’s ability to continue as a going concern.
I don’t know about you, but that response, centering around Mr. Mason’s intent, strikes me as pretty naive. In today’s business world, every internal communications should be prepared with the expectation that eventually, it will be seen by someone outside of the company or perhaps enter the public domain. Mr. Mason may not have known that his email would prompt questions from the SEC, but his firm’s corporate communications team and lawyers should have known. Remember, this is a company with a market capitalization of about $13 billion.
In most companies this size, the legal team reviews and approves CEO communications with employees. Though Groupon’s letters to the SEC indicate that in-house and external legal counsel briefed Mr. Mason on his responsibilities regarding communications during the quiet period, there is no specific statement by Groupon that legal counsel approved the employee email before it went out.
My bet is that Groupon now has an internal communications director who has overhauled the process of CEO emails and other employee communications to ensure that SEC rules and other laws are followed.
Let’s hope I’m right.
- Bits Blog: DealBook: In a Quiet Period, Groupon Feels the Noise (bits.blogs.nytimes.com)
- SEC probed Groupon about Andrew Mason memo prior to IPO (venturebeat.com)
- The SEC Wanted Answers About Andrew Mason’s Leaked Groupon Memo (blogs.wsj.com)
- Ahead of I.P.O., S.E.C. Pressed Groupon On Accounting (dealbook.nytimes.com)
- Report: Groupon may delay IPO (usatoday.com)
- Groupon’s IPO Much Ado About Nothing? (allthingsd.com)