Gustavo Ballvé on December 12th, 2012
Corporate Governance, Food for thought, Mental models, Signal or Noise

I wasn’t even going to comment on whether Netflix CEO Reed Hastings broke the spirit of Reg FD. He had to be smarter than that, but it’s at best a show-off case by the SEC to scare other executives into common sense. Such a minor case that I considered it noise, at least until I read this piece by Steve Davidoff (the “Deal Professor” at NYT’s Dealbook), a writer I usually agree with and generally admire. This time, however, he is using this case to argue against Reg FD as a whole. There’s a lot not to like: the selective use of academic studies (just one counterargument of many possible ones: could the drop in analyst coverage of smaller companies since 2008 be an effect of that little problem called the Global Financial Crisis – rather than the nefarious effects of Reg FD?), considering widely adopted habits in the US as globally adopted ones, considering Facebook as widely accessed for financial information as other online services such as, say, sec.gov and the hundreds of services that feed automatically from that site (plenty of companies block Facebook and plenty of users are still NOT in it, and shouldn’t be required to do so in order to “keep up”) and so on. In fact, the Professor fully argues that selective disclosure was good in that it reduced volatility… I’m not even going there.

Was the information material? No. Was it a conscious private tip by Mr. Hastings to a favored few? Certainly not. But does this warrant questioning Reg FD with dubious arguments? Of course not, especially not for the reasons the Professor mentions. I am a firm believer in transparency and in the power of social media to spread and collect information (why else would I write this blog?), but we’re still light-years (thankfully) from considering Facebook the serve-all, include-all platform for everything.

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