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Openness and sharing may be the hallmarks of social media and online communities, but transparency and disclosure can be a tricky area for companies to navigate when building their online profiles and presenting information to clients and customers in the digital world.

Ethical gray areas still exist when it comes to transparency, and a mistake in judgment can have negative ramifications for companies in any industry. Experts say the key to avoiding fines, tarnishes to a brand and all around online-community-building-chaos lies in developing proper internal policies, communication and education surrounding digital engagement.

Michael Brito, vice president of social media at Edelman Digital, cites a lack of internal policies to regulate and support social media engagement as a major contributor to transparency and disclosure issues for companies. “All these companies were on a quest to have a social media presence, and they jumped into it right away. Employees are just kind of out there,” he said. “I think the root cause of transparency and disclosure problems isn’t so much that companies are being purposely deceitful, it’s that they never developed internal governance models to educate and empower people to engage the right way.”

Without proper safeguards in place, issues can quickly arise.

For example, rogue employees may be publishing information about a company or promoting its products without reporting back to the company internally about what they are posting and without disclosing their employment at the company. Others may be posting comments in response to news articles, OpEds, blog posts or in other online forums without being briefed on the organization’s messaging and without identifying their association.

“When no one’s talking internally and when one-off employees are doing their own thing, it can be disastrous for a company,” said Brito.

He also cites potential problem areas with employees on Twitter, using an example of an employee with a large following who tweets about a personal interest area, but not about the company. “Let’s say she then mentions the company for some reason. At what point does she need to identify that she works there?” Brito asked hypothetically.

Companies also can run into problems by not properly disclosing affiliate links and relationships with bloggers, according to Patrick Thoburn, a member of the ethics advisory panel at the Word of Mouth Marketing Association (WOMMA) and co-founder of Matchstick, a Toronto word of mouth marketing company.

“Marketers have encountered big issues with disclosing terms of engagement with bloggers,” he said. If a blogger is taken on a company trip, for example, it needs to be disclosed. “In some ways even higher standards apply in online media,” he said, noting that the Federal Trade Commission has become more active in regulating the digital marketing world.

Brito also cites hired bloggers as a big problem area. “Per FTC guidelines, bloggers need to disclose that relationship if they are writing about a product. If they don’t already, companies need to know that.”

Online contests can create transparency issues too, according to Thoburn. A consumer might enter a contest and start tweeting about the company. Initially, the contestant and the company don’t have a material connection. But should he win, they might, and proper disclosure would have been required from the beginning.

Another online publishing dilemma for companies: who writes the content of tweets and other postings for CEOs or high-ranking executives? Well-known CEO tweeters likes Tony Hsieh of Zappos write their own tweets, but less engaged CEOs may be tempted to use ghostwriters. However, doing so rates low on the transparency scale and doesn’t provide much business value. “Most people are savvy enough to know whether it’s the actual voice of the person and not just a rewritten press release,” Brito said. “You shouldn’t be tweeting if you don’t have time to do it yourself.”

Sima Dahl, social media strategist and president of Chicago-based marketing consulting firm Parlay Communications, agrees. “Executives need to write their own tweets,” she said. “If you’re an individual online, you need to be that person and you need to do so under your own voice. If you’re not comfortable, don’t try to fake it.”

Transparency and disclosure issues can pop up without warning, and companies need to be prepared to evaluate some scenarios on a case-by-case basis. But thinking about dilemmas that may arise, instituting an open culture and setting guidelines before unleashing employees to engage can go a long way toward mitigating issues.

“Internal social media policies are very effective at educating employees and achieving compliance,” Thoburn said.

Brito said companies are realizing that controls like governance models, firewalls and training are needed to avoid negative issues. Even younger generations that are very proficient in social media can be culprits of disclosure lapses. "It’s not top of mind for them,” Brito said. “For example, for the new hire who’s excited to start tweeting about the company, organizations really need to have employee engagement and ethics training in place.”

Dahl says it’s important to harness the energy of those employees, and to set them up to succeed. “You want to have employees talking about how great your company is,” she said. “Whether it’s how to launch a successful blog, create their first Twitter handles or how to compose healthy tweets, provide the proper education and advice up front and then let your employees go. You’ve hired smart people, so instill a sense of trust, and then be swift in disciplining someone who breaks that trust.”

But developing and implementing those guidelines can be a challenging task, and it requires support from leadership and departments throughout the organization. Dahl notes that it’s easy for companies to get hamstrung: “A lot of times companies get scared. It’s the sort of thing where if you stop to consider all the ethical and legal implications, you won’t move forward.”

That’s why she advises companies to collaborate across departments. “Include people throughout the organization,” she advised. “You might find people who are already engaged and want to be engaged in departments outside of marketing. Show them how to talk about things and engage them to lift your brand.”

Brito said companies that communicate effectively in the online sphere often gather a committee of representatives from legal, marketing, human resources, communications, IT and various business units to create social media centers of excellence that are responsible for creating guidelines and training. “In order for it to be comprehensive, everyone internally needs to be part of the process,” he said.

Organizations like WOMMA that keep track of ethical issues and FTC guidelines also can be helpful in developing standards and guidelines. WOMMA educates members on ethical issues and provides a member code of ethics that can serve as a reference point for developing internal ethics policies.

For example, standards of conduct required by WOMMA’s code of ethics include making meaningful disclosures of relationships or identities with consumers in relation to marketing initiatives that could influence a consumer’s purchasing decisions; meaningful and prominent disclosure of all forms of consideration or compensation received from a member, marketer or sponsor of a product or service; disclosure of material aspects of commercial relationships with a marketer; compliance with the FTC’s Guides Concerning Use of Endorsements and Testimonials in Advertising; and genuine honesty in communication.

Without standards in place, companies leave themselves open to reputational, legal and brand implications. “Remember that people and competitors are watching what you’re publishing online,” Thoburn said. “A lack of ethical behavior can be a competitive disadvantage, and competitors will be happy to point out ethical shortcomings.”

Daliah Saper, principal with Saper Law Offices in Chicago, said companies that make mistakes with transparency can leave themselves open to FTC fines and can be targeted by competitors for deceptive trade practices.

As Brito notes, they also lose credibility. “Companies that defy the trust of an online community will definitely have a hard time regaining their reputation.” But he also says companies are beginning to understand that. “Companies today are getting it. They don’t want to deceive people,” he said.

And Saper suggests relatively easy ways to avoid liability. “Monitor your bloggers and employees, and be dedicated to being very transparent.”

With transparency such an inherent part of today’s online communities, experts say companies need to make it part of their daily decisions. As Thoburn explains, “There’s a strong spirit of transparency in the roots of the blogosphere. Social media is very much imbued by principals of transparency, and companies need to take the time to maintain it and do things right.”

Clare Fitzgerald is a freelance writer specializing in business, financial and political trends. She also provides corporate writing services to a wide range of industries.

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