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A social media policy is an internal guideline for companies to manage employee interactions on social media platforms like Facebook, Instagram, and Twitter. These platforms enable firms to engage potential customers and shape their brand identity, but they also pose risks, such as damaging posts that can harm a company's reputation. The video discusses the importance of social media policies and outlines what a good policy should include. The presenters, eFORMS, offer a resource for customizing a social media policy online and emphasize the need to differentiate between social media policies and other social media-related practices.