The New York State comptroller filed a lawsuit against Qualcomm on behalf of the New York State pension fund, a major Qualcomm shareholder and the country’s third largest public institutional investor, seeking access to the company’s records to determine how it is spending corporate funds in the political arena.

According to the novel complaint, which was filed in Delaware Chancery Court on January 2, Qualcomm failed to take actions to increase transparency into how corporate funds were used.  Pointing to the dozens of major public corporations that have voluntarily disclosed their political spending in the wake of the Supreme Court’s Citizens United decision, the comptroller argues that the only way to assess the financial risks to shareholders posed by corporate political contributions is to increase transparency. The complaint cites several academic and statistical studies to conclude that corporate political spending “can and often do[es] harm the economic interests of the corporation and its stockholders.” The Attorney General also seeks information about contributions to activist organizations that do not disclose their donors, which is part of the office’s wider campaign to compel disclosure by 501(c)(4) groups. 

As we have discussed here, activist shareholders, often led by labor-affiliated and social-investing funds, increasingly have turned to the proxy process to try to impose extensive disclosure obligations on corporations. The 2012 proxy season saw a record number of such resolutions. These measures seek to require management to disclose to investors how much it spends on political activity, and in some instances, to prohibit companies from engaging in any political spending. More recently, we have seen calls for the disclosure of contributions to trade associations and other organizations that might use those funds for political activity and disclosure of lobbying expenditures. 

According to the NY comptroller, the pension fund “has pursued and will continue to pursue proxy proposal recommending comprehensive disclosure of corporate political spending.” Nevertheless, the lawsuit filed against Qualcomm may prove to be a turning point in this ongoing campaign waged by activist shareholders from shareholder resolutions to litigation. 

Public policy and political activities are often considered an important part of how a company can increase shareholder value. While much of the information activist shareholders seek is already publicly available, taking further steps to disclose and aggregate this information may allay shareholder concerns and minimize litigation risk. Such measures may include:

  • adopting and disclosing policies and procedures for board oversight of corporate political spending;
  • disclosing all corporate political expenditures at least annually; and
  • releasing information about the company’s participation in trade associations active in political campaigns and lobbying.