Tech Giant Qualcomm Discloses Political Spending After Pressure from New York
After a shareholder sued Qualcomm to see its political expenditures, the tech giant backed down and voluntarily agreed to disclose its spending. Voluntary disclosures, however, do not go far enough to protect investors.
Last week, Qualcomm, the country’s largest maker of computer chips for mobile devices, began telling the public what it spends on politics. The company’s change in policy came in response to shareholder demand, but not your everyday shareholder demand — a very big shareholder made a very pressing demand.
The New York State pension fund holds almost 5.5 million Qualcomm shares valued at $359 million. The trustee of the fund, Comptroller Thomas DiNapoli, has been working to protect the fund’s investments by gathering information on companies’ political expenditures, which have the potential to threaten investor return. DiNapoli tried to learn about Qualcomm’s political spending through letters to the company and shareholder resolutions, but nothing worked. So he sued the tech giant, arguing that laws giving shareholders the right to inspect corporate books apply to records of the firm’s participation in politics.
DiNapoli’s suit had the potential to give investors a new tool to keep track of the ways corporations spend their money on attempts to influence elections. Qualcomm, like many American corporations, is registered in Delaware because of lax regulations in the state. A ruling from the Delaware courts guaranteeing shareholders the right to access political spending records would have benefited corporate democracy throughout the nation. But the issue won’t be decided by the courts, because DiNapoli withdrew the suit when Qualcomm voluntarily agreed to disclose its spending.
Investors need this type of transparency to make informed decisions. They need to know what risks the company is willing to take with their money. Political spending is an area where the interests of corporate directors and shareholders are likely to diverge — CEOs may engage in activity that furthers their own political agendas rather than the company’s bottom line. And many shareholders do not want their money spent in support of causes or candidates they disagree with.
Qualcomm’s voluntary disclosures are admirable. The company joins a growing number of American corporations that choose to release information about their political spending. A 2012 study found almost 100 companies in the top tier of the S&P 500 Index that disclose some of their political spending.
Voluntary disclosures, however, do not go far enough to protect investors. Even among those that choose to report their political spending, corporations have different policies about what should be revealed. For example, Aetna has a policy of disclosing campaign contributions, but last year it did not disclose millions in contributions to tax-exempt groups that spend on politics until they were mistakenly included in a regulatory filing. No one knows what else is being left out of political spending reports. And of course, the voluntary nature of these policies means companies can end them at any time.
Shareholders need the protection of a consistent rule that is enforced by a strong oversight entity. The Securities and Exchange Commission has the authority and the mandate to ensure investors have information about corporate political spending. In 2009, in response to the financial crisis, the SEC began requiring corporations to disclose the ways directors oversee risk-taking. No doubt some companies already voluntarily released that type of information, but enforcing a uniform rule was a necessary step forward. The SEC recognized the importance to shareholders of information about risk-taking after the financial meltdown, and in today’s climate of skyrocketing election spending fueled by the Supreme Court’s decision in Citizens United, information about political spending is just as important.
Qualcomm’s political spending came to light only after tenacious efforts by a committed major shareholder. The SEC should protect investors nationwide by crafting regulations that will require all publicly held companies to disclose as much information as Qualcomm now does.
Photo by theqspeaks.