Controversy and backlash can blindside your stocks when you least expect it, leaving shareholders to pay the price. Just ask McDonald's
Not so happy anymore
The Happy Meal is one of the fast-food chain's best-known items. But Mickey D's burgers and fries aren't exactly healthy fare, and the Happy Meal is targeted squarely and heavily at little kids. Apparently, that didn't sit well with San Francisco's Board of Supervisors, which has voted to prohibit McDonald's or any other restaurant from packaging toy giveaways alongside meals that exceed set standards for calories, sodium, and fat.
For years, news headlines have trumpeted the legitimate health risks of obesity in America, especially among children, so it's no surprise that McDonald's, Yum! Brands
All the same, political or consumer brouhahas like San Francisco's ruling represent a serious risk for publicly traded companies. Luckily, there's at least one good way to spot rising risks and growing public ire before they start taking their toll on your investments' sales and profits.
An SEC filing that's good reading
To see what kind of issues might gather momentum, check out the shareholder proposals in your companies' proxy statements. These proposals often reflect issues that a lot of people truly care about, and which could ultimately result in bans or consumer boycotts of companies' products.
Here are a few notable examples from several major companies' proxy statements last year:
(NYSE: WMT)shareholders demanded disclosure of political contributions, a gender identity non-discrimination policy, and humane poultry slaughter practices for suppliers.
(Nasdaq: MSFT)and Oracle (Nasdaq: ORCL)both faced environmental shareholder proposals after being removed from sustainability indexes compiled by NASDAQ .
(NYSE: XOM)proxy statement has a slew of predictable shareholder proposals relating to environmental issues like water, wetlands, Canadian oil sands, natural gas production, and greenhouse emission goals. However, it also includes an interesting proposal suggesting reincorporating in North Dakota, a shareholder-friendly state that's near and dear to corporate governance fans' hearts.
Is trouble brewing?
Even companies with relatively squeaky clean images, like Google
Privacy issues have become a serious hot-button issue for Web-centric companies, and Google's livelihood is closely tied to how people feel about their privacy on the Internet.
Many activist shareholders push for changes that reflect issues about which many consumers care deeply. If companies and their shareholders ignore these controversies, they can eventually devastate brand loyalty, damage sales, and hurt share prices.
Companies' proxy statements are a great way to find out the story behind your stock, and spot emerging future risks. Don't ever let a flak attack take you by surprise.
Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on corporate governance.
Google, Microsoft, and Wal-Mart are Motley Fool Inside Value picks. Google is a Motley Fool Rule Breakers recommendation. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of ExxonMobil, Google, Microsoft, Oracle, Wal-Mart, and Yum! Brands. Try any of our Foolish newsletter services free for 30 days.
Alyce Lomax does not own shares of any of the companies mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's highly nourishing disclosure policy comes with Tom and David Gardner action figures.