When the U.S. Supreme Court decided in Citizens United that companies should be as free as individuals to exercise political speech through campaign contributions, the justices gave weight to the idea that “corporate democracy” would let shareholders keep tabs on how company money was being spent.
Problem is, no mechanism exists to guarantee uniform disclosure of political expenditures by corporations.
That’s why New York Comptroller Thomas DiNapoli, the Council of Institutional Investors and others have been trying since the 2010 decision to get companies to reveal where money is being directed. They’ve written letters to corporate boards, submitted resolutions for shareholder consideration at annual meetings and, most recently, gone to court.
DiNapoli took the latter tack with Qualcomm Inc., filing suit in January against the manufacturer and marketer of mobile products and services. Last Friday, the sides announced a settlement under which the lawsuit would be dropped and Qualcomm would post its corporate political spending.
The list of expenditures was up on Qualcomm’s website immediately, along with a four-page policy on how decisions about federal, state and local campaign contributions would be made. The action earned the company praise as “a standard bearer for corporations looking to provide stockholders with transparency with respect to its political spending.”
The lawsuit, though, offers some insight into the slog to that goalpost.
DiNapoli is sole trustee of the $150 billion New York State Common Retirement Fund, the third largest institutional investor in the nation. It owns 6.1 million Qualcomm shares — the largest stake by a public pension in the company — valued at about $378 million.
That gives DiNapoli a pretty big club to wield, but he still was unable to get Qualcomm to open its books on political spending. He started asking formally for access last summer, but through the fall and winter, Qualcomm “adopted a variety of tactics to delay engaging with the fund,” the lawsuit states.
Even before Citizens United, the Common Retirement Fund “recognized the risks to shareholder value that are posed by corporate political spending,” according to the lawsuit, and urged companies to be more transparent on their expenditures.
DiNapoli’s office has pushed disclosure through proxy resolutions — or the threat of them — at annual shareholder meetings. In 2011 and 2012, it filed 27 such resolutions; for the 2013 meeting season, 26 have been filed.
But the Common Retirement Fund, which has stakes in 1,500 U.S. companies, doesn’t want to have to negotiate with each one to get a look at their political spending, DiNapoli wrote in a letter to the Securities and Exchange Commission last year.
“Only a uniformly applied disclosure requirement promulgated by the SEC can assure that investors will have the level of disclosure of political spending necessary for informed decision-making on a portfolio-wide basis,” he said.
The SEC website indicates the agency could have a proposed disclosure rule to consider by April, but no one is betting it’s a sure thing. Thousands of letters both for and against the idea have been filed.
One SEC commissioner, though, has been vocal in support of greater disclosure. In speeches he has given, Luis Aguilar likens the issue to SEC rules released in 2009 that required added disclosure on CEO pay and board makeup.
“A well-drafted rule would improve both the quality and comparability of disclosure, as well as helping to provide a level playing field for issuers,” he offered earlier this month.
We’ll have to stay tuned.
Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at firstname.lastname@example.org.