What is a common consequence if related-party transactions are not disclosed?

When related-party transactions are not disclosed, potential harm to shareholders is a significant consequence. This harm arises because shareholders may not have a complete understanding of the risks associated with such transactions, which can lead to decisions based on incomplete or misleading information. Related-party transactions often involve conflicts of interest, and if these conflicts are not transparently communicated, shareholders can be adversely affected by decisions that do not align with their best interests.

Undisclosed transactions can result in financial losses, and in some cases, management might engage in practices that prioritize personal gain over the company's performance. Shareholders depend on accurate financial disclosures to make informed investment decisions. When related-party transactions are hidden, they risk financial repercussions, diminished trust in the company’s governance, and a decline in stock value.

In contrast to this, the other options do not accurately represent the consequence of nondisclosure in a related-party context. Increased compliance costs could occur as companies might need to invest in more rigorous oversight to manage the risks of undisclosed transactions, but this doesn’t capture the direct harm to shareholders. Legal benefits for the company and better relationships with regulators are unlikely since nondisclosure could lead to regulatory scrutiny and possible legal ramifications, further eroding shareholder confidence.