With the midterm elections finally over, a new risk may appear in next year's proxy statements. If the companies in your portfolio get called out for controversial political contributions, your investments could face a whole slew of dangers.
Activist investors now seem far more likely to bring this topic to light, given the Supreme Court's Citizens United ruling earlier this year (you know, the "corporations are people, too" decision), which freed up companies to contribute to political campaigns.
Earlier this week, The Conference Board, a corporate governance and research group, publicly pushed for corporations to adopt oversight rules regarding political spending, lest they face "serious financial, legal and reputational risk."
The timing of the Conference Board's public stance right before the midterm elections was no coincidence, since concerns about corporations' secretive, undisclosed political contributions abound.
The Conference Board's report pointed to Wal-Mart
Those three aren't the only examples. Best Buy
Last summer, in the wake of the Gulf oil spill, BP
In October, News Corp.
Fight for full disclosure
Activist investors seem sure to push for full disclosure of political contributions from public companies. When some of those contributions come to light, shareholders and consumers might not be happy.
Political donations clearly might not be the best use of shareholder capital, particularly if they aren't reported in a responsible, transparent manner. The best companies compete on their own merits, rather than trying to buy regulatory favor through hefty campaign contributions. Why not spend that money to innovate and invent stuff, guys? Lobbying for political advantage is a pretty weak way to conduct "business." (I know our elected officials have fostered this environment, so it's not entirely corporations' fault.)
In a perfect world, companies wouldn't lobby for such artificial advantages at all. But at least we shareholders can give credit to businesses that conduct their donations in an honest and forthright manner, and prove willing to face the music from customers. Activist investors will almost certainly demand full disclosure on political contributions -- but every shareholder should join their push for greater transparency.
Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on corporate governance.
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Alyce Lomax does not own shares of any of the companies mentioned. The Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.