Where's IR leadership on firms who track investors?

CLIENTS of Nasdaq Stock Market Inc.’s (NASDAQ: NDAQ) Shareholder.com investor relations website hosting business have more reasons to question the wisdom of their vendor’s continued use of cookies to track and compile detailed dossiers on investors without their knowledge.

A coalition of privacy advocates will hold a news conference today at which, according Ad Age, they are to propose a do-not-track list for the Internet that would bar companies from tracking web users who opt out. This would be similar to the Do Not Call Registry.

The New York Times reports that Time Warner-owned AOL will announce today it is setting up a website where consumers can permanently add their names to do-not-track lists run by the largest advertising networks.

Ad Age says the privacy groups also want companies to prominently disclose what information they are tracking. The groups behind the proposal include the Center for Democracy and Technology, Consumer Action, Consumer Federation of America and the Electronic Frontier Foundation.

Online privacy increasingly in the spotlight

Meanwhile, the US Federal Trade Commission will hold a two-day workshop on ad targeting and internet privacy on Thursday.

Steve Rubel, a senior vice president at Edeleman, the public relations firm, sees the do-not-track list as the first shot in a debate over online privacy that will potentially bring the issue into sharper focus for web users.

“Regardless of where the Feds decide to weigh in, the noise around mining behavioral data and patterns and the potential privacy implications is only going to get louder in the coming months. All of this is going to make consumers even more aware of just how much is being tracked. Some will begin to ask serious questions,” says Rubel in a blog post.

The tracking of investors and analysts on company investor relations websites has been an issue that I have often been critical of over the past two years (15 times since March 2006, actually).

However, I have yet to see anything from the professional associations such as the National Investor Relations Institute (NIRI) that has addressed the issue — or even raised it for discussion.

Hundreds of public companies currently use cookies, small text files placed on a users’ computers, to infringe on the anonymity of investors and track their activities on their websites. Most of these companies are using a hosted IR website developed by Shareholder.com, a subsidiary of Nasdaq.

Shareholder.com president touts tracking

Whereas Shareholder.com in the past heavily promoted the investor-tracking capabilities of its products, it moved to downplay these features in its public marketing and on its website after two embarrassing incidents reported by us.

The first was when the company was found promoting products that breach new Securities and Exchange Commission (SEC) privacy requirements for sites hosting online proxy statements and annual reports. And the second was when we reported on a Shareholder.com client using cookies that infringed on users’ anonymity on a website hosting its proxy materials.

However, while it seems Shareholder.com may be toning down what is says about its investor tracking activities, it is continuing to pitch them to IR departments at public companies as a way to win their business. As recently as today in fact, senior executives at Nasdaq, including Shareholder.com president Doug Ventola, are touting investor tracking to listed companies in a registration-required webcast on Nasdaq.net, a website set up for companies listed on the NASDAQ exchange.

“You can actually have an understanding and visibility into every data point that touches an individual analyst. Through our tools you can understand individual webcast participation by an analyst, their website activities, where they’re — if you’re using a Shareholder.com IR website — which pages and what parts of that website are being used by that analyst,” Ventola says early on in his sales pitch on the webcast, which was recorded June 26.

Where’s the leadership in the IR community?

Again, I think it is just plain stupid to track investors’ activity on your website to the point where their anonymity is infringed. For one thing, many investors are deeply protective of their investing activities and are fearful of others potentially gaining insight into their trades. This could cause them to avoid using companies’ websites if they know there is a chance their activities could be logged.

The issue also is important in a shareholder meeting context, where investors’ votes should be confidential. The SEC made it clear that this is not allowed, and its rules refer specifically to cookies like those Shareholder.com clients use. The rules kick in on January 1, 2008 for large issuers.

At the end of the day, though, tracking investors and compiling detailed dosiers on their activities without their knowledge or consent is to me simply unethical. It does not engender trust in a profession where trust is extremely important.

I think NIRI has been asleep at the swtich on this issue. In August 2006, I wrote that “the 100 or so companies that spy on investors’ website use without due regard for the consequences are putting the credibility of the entire IR profession at risk. It is high time that associations like NIRI and individual companies and IR professionals take a long, hard look at this issue.”

I’ve also raised the issue privately with a senior editor of a well-known magazine in the industry, but nothing come of that either.

All of this looks bad because Shareholder.com and its parent are big sponsors and advertisers. This can create the impression that people don’t want to speak up or tackle the issue for fear that it could hurt them financially.

Bold leadership is required.

IR Web Report

IRWebReport.com was founded by Dominic Jones in February 2001 to promote best practices for online investor relations communications. In July 2010, the site had more monthly visitors than IR Magazine and IR Alert combined, according to Compete. We would like to thank our readers for their continued support and interest.