Canadian public companies devote vast amounts of time and attention to lobbying and other types of political activity, but most of this isn’t disclosed to shareholders, and could be concealing risks to investors, says the Shareholder Association for Research and Education (SHARE) in a new report.

The Vancouver-based shareholder research firm published a new report Friday that examines companies’ political activities from the point of view of investors.

The report finds that corporations are devoting considerable resources to lobbying and other political activity, but that very little is disclosed to shareholders. The report suggests that these efforts can create reputational, governance and financial risks for investors, which can’t be adequately assessed.

According to the report, the 60 largest companies on the Toronto Stock Exchange employ almost 1,000 registered lobbyists, not including their various trade associations. And, those companies initiated almost 1,100 meetings with senior federal officials last year. Additionally, it says that the five most active trade associations initiated another 729 meetings.

Moreover, it notes that shareholders have “no way of knowing the full extent of expenditures on lobbying or the positions taken by their companies. While some of this lobbying may well benefit investors, without additional disclosure neither the benefits nor the risks resulting from such activity can be evaluated.”

Additionally, the report warns that certain political positions that are taken by a trade association may pose reputational risks for the companies that belong to those groups, and their shareholders. “In general, shareholders should be careful to assess the degree to which a corporation is associated with a trade association or third party’s lobbying and advocacy activities,” it says.

The report also looks at direct political spending by companies and finds that, in 2013, 46 of the 60 largest TSX companies gave money to candidates at the provincial level (corporate donations are often allowed at the provincial, but not the federal, level). Of those 46 companies, SHARE says that only 11 of them reported to shareholders that they made contributions, and none of them disclosed how much they gave to which parties. And, it notes that only 22 of the 60 companies on the TSX have disclosed a policy on political campaign spending.

Overall, it concludes that the amounts currently being donated are relatively small; but, it warns that even small political contributions can create risks for companies. For example, it says that the corporation may become associated with political positions and personalities that create reputational risks; it may be perceived as buying influence; and, relationships with legislators may be harmed if the company backs an opposing party.

In addition to this, the report finds that publicly-traded companies also contribute to party leadership campaigns (which it says is legal in eight provinces); they contribute to think tanks that advocate for certain policy positions; and, they run their own advocacy campaigns.

“Although companies may wish to support organizations that contribute research to public policy discussions, companies that provide funding to these organizations should be clear about the purpose of this funding and how it aligns with the company’s interests – and that of their shareholders,” the report says.

It also recommends that boards closely oversee the purpose, content and timing of corporate advertising and public relations campaigns, particularly connection with public policy and electoral campaigns, which it says may create additional reputational risks for companies and their shareholders.

“Usually when we talk about corporate involvement in the political process it’s from the perspective of the general public, who are concerned about corruption or undue influence,” says Kevin Thomas, director of shareholder engagement at SHARE. “It’s just assumed that the investors in those companies are being well-served by this activity. The reality is that most of this activity is unknown to investors, its risks aren’t well identified, and company boards have few policies to oversee it.”

“Political activity by powerful corporations is clearly a public governance issue, but we also see it as a corporate governance issue,” he said.

SHARE says that this latest paper is part of its ongoing project to promote discussion among investors about the appropriate governance of corporate political spending, including policies, disclosures, and regulatory measures. As a follow-up to the paper, it intends to engage in discussions with companies, investors, and policymakers in Canada about the issues raised in the report, and possible policy options for addressing these concerns.