I watched market rumors spread across the NYSE trading floor for a decade. Now they’re moving at warp speed
By Richard Torrenzano
Rumors are embedded in the culture of Wall Street and global markets. The very name of The Wall Street Journal’s notable “Heard on the Street” daily column (one of my favorites), illustrates the importance of what is whispered in the corridors of power.
I was on the management and executive committees of the New York Stock Exchange for almost a decade. At the time, if you stood in the press gallery overlooking the main trading floor and watched somebody offer spicy gossip at one end of the trading floor you could almost see it travel from person to person across that enormous room.
Some rumors are believable. Some are obvious nonsense. Others fall somewhere in between. Countless prove to be true as time goes by or are self-fulfilling. Several fade away–but in today’s digital world, they never really disappear. This chatter is transmitted instantly through telephone, private email, social media, and instant messaging platforms.
Regulators have been trying to curb the use of unauthorized instant message platforms for business, hitting the financial industry in recent months with substantial penalties for their misuse. Still, they are a fact of life, showing no signs of going away.
Rumors are carried by haters, spread by fools, and accepted by idiots. It does not matter
What’s at stake between the best and worst response to a rumor can be a stock price collapse, a drop in sales, ongoing reputational damage, an inability to attract and retain talented people, as well as changes in company leadership.
Today’s headlines and social media commentary show the damage that can be caused by individuals or groups with ambitious political or business agendas and savvy actors to assess what kinds of assertions will most destabilize companies.
Rumors and speculation have become timely tactical tools to drive organizational change. Worse, speculation is often sparked from within an organization or its immediate marketplace–and where there’s smoke, there is usually potential conflagration.
Rumors disseminated with no discernible source or basis are easier to dispel. If patently false, a company can dismiss the rumor and kill it quickly.
However, if subsequent information lends any credence whatsoever surfaces, these rumors lead to speculation.
‘The only thing we know about the future is that it will be different’ -Peter Drucker
Lightning advances in communications and technology have converged over the past decade to make rumors and speculation an immediate threat to companies.
Within minutes of any incident, more than a few come forward offering immediate and sometimes uninformed opinions about the story. Today, just about anybody can be deemed a pundit or an “expert” commentator.
Cutthroat media competition is driving stories, sometimes with little editorial oversight. Commentary and gossip, once the exclusive purview of showbiz coverage, is now a staple of business and financial news.
No longer boring, investing transformed into day-long cable business shows and non-stop headlines. As they spread across the internet, opinions leap from rumor and speculation into databases within minutes.
C-Suite excesses, from embedded corruption to political grandstanding, have added fuel to the fire.
Management is also constrained by the Securities and Exchange Commission’s (SEC) rule 10b-5, which binds executives to telling the truth. It is illegal for any person to defraud or deceive investors, including through the misrepresentation of material information, with respect to the sale or purchase of securities.
‘Great things are done by a series of small things brought together’–Vincent Van Gogh
In the current climate, management is guilty until proven innocent.
Companies that understand the power of perception, and maintain credibility and constituency loyalty adhere to a handful of fundamentals in normal and crisis moments.
The “no comment” comment or “we don’t comment on rumor and speculation” is not always an option. It may be easy to say and sound comfortable for attorneys but markets no longer buy it. In most cases, those comments will not stop ongoing commentary.
Respond with facts. Facts expel fiction. Present sound reasons why the rumor or speculation is not accurate. It might be difficult for executives and lawyers to agree and use facts–but that approach is effective and everlasting in this digital environment.
Speak in simple English. Industry jargon and legalese dramatically detract from credibility. Express empathy and demonstrate understanding, don’t show arrogance or attempt stonewalling because you don’t like the question. It will just add to the speculation.
Communicate consistently–and earn a reputation for doing so with market and media participants. Rumors and speculation love information vacuums. Gather, verify, and share information with investors and other constituents. Don’t wait until you have legal requirements to make an announcement–you will have many more questions to answer.
Remain vigilant. Speculation has a long shelf life. It manifests beyond investor memory in databases and social media. Even after constituencies have moved on to the next story, the narrative can be retrieved and the problem reactivated by a troll sometime down the road.
Establish a process and procedures to get information quickly from the ground floor to the C-suite. Alert management to positive, negative, and even the lack of chatter about constituency agendas inside as well as outside the organization.
Black swan events are predictable
Rumors and speculation are not orphans–they are born of a smoldering tension somewhere–and then someone pulls a trigger.
In dealing with these critical moments, preserving a company’s reputation rests on leadership. Grace and transparency under pressure are needed to match the depth, breadth, magnitude, and speed of today’s online world and markets.
Ill-prepared leaders will suffer more than 15 minutes of shame. If you don’t take control of how you are perceived, the markets and the media will do it for you.
Richard Torrenzano is the chief executive of The Torrenzano Group, which helps organizations take control of how they are perceived. For nearly a decade, he was a member of the New York Stock Exchange management (policy) and executive (operations) committees. Richard is a sought-after expert and leading commentator on financial markets, brands, crisis, media, and reputation.
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