{"id":66,"date":"2013-01-11T16:24:10","date_gmt":"2013-01-11T20:24:10","guid":{"rendered":"http:\/\/blogs.duanemorris.com\/capitalmarkets\/?p=66"},"modified":"2014-09-10T10:49:26","modified_gmt":"2014-09-10T14:49:26","slug":"new-york-comptroller-seeks-qualcomms-records-on-political-giving-sec-contemplating-political-contribution-disclosure-rules","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/capitalmarkets\/2013\/01\/11\/new-york-comptroller-seeks-qualcomms-records-on-political-giving-sec-contemplating-political-contribution-disclosure-rules\/","title":{"rendered":"New York Comptroller Seeks Qualcomm\u2019s Records on Political Giving; SEC Contemplating Political Contribution Disclosure Rules"},"content":{"rendered":"

A \u201cbooks and records\u201d action brought by New York\u2019s comptroller to determine how Qualcomm Incorporated \u201cis spending corporate funds in the political arena\u201d may create a precedent for shareholders seeking to force corporate disclosure of political contributions.<\/p>\n

The suit was brought last week in Delaware Chancery Court by Comptroller Thomas DiNapoli as trustee of the New York State Common Retirement Fund, a shareholder of Qualcomm. The complaint cites to recent studies concluding that \u201ccorporate political spending is negatively correlated with enterprise value\u201d and may indicate \u201cmore widespread control and governance deficiencies.\u201d<\/p>\n

The Retirement Fund\u2019s action comes at a time when the Securities and Exchange Commission may be considering rules to require public companies to disclose political spending. The Harvard Law School Forum on Corporate Governance and Financial Regulation reported in a January 9, 2013<\/a> entry that the SEC has indicated in an \u201centry in the Office of Management and Budget\u2019s Unified Agenda \u2026 that, by April, it plans to issue a Notice of Proposed Rulemaking on requiring public companies to disclose their spending on politics.\u201d<\/p>\n

The Retirement Fund\u2019s lawsuit, and presumably the SEC\u2019s proposed rulemaking, is a reaction to Citizens United v. Federal Election Commission<\/em>, the landmark United States Supreme Court opinion that held that corporate political spending is a kind of protected speech under the First Amendment. The opinion struck down a federal statute that banned corporations from making political expenditures in federal campaigns. Citizens United and a subsequent Supreme Court ruling have been interpreted to allow unlimited spending by corporations on political campaigns, so long as contributions are not made directly to a campaign, a candidate or a political party.<\/p>\n

According to the Retirement Fund\u2019s suit, Citizens United<\/em> was premised on the assumption that corporate political spending would be disclosed and that shareholders and citizens could keep such spending in check by, among other things, exercise of corporate governance rights. Justice Anthony Kennedy, writing for a 5-4 majority, rejected the proposition that corporate political spending could be restricted as a means to protect shareholders. He reasoned as follows:<\/p>\n

With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters. Shareholders can determine whether their corporation\u2019s political speech advances the corporation\u2019s interest in making profits, and citizens can see whether elected officials are \u201cin the pocket\u201d of so-called moneyed interests\u2026 The First Amendment protects political speech; and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way.<\/p>\n

While several public corporations do disclose political spending to shareholders and the public, many do not.<\/p>\n

Here, Qualcomm refused the Retirement Fund\u2019s August 2012 written demand for access to the corporation\u2019s records of political giving, according to the complaint. The Retirement Fund asserts that the demand articulated a \u201cproper purpose,\u201d as required by section 220 of the Delaware General Corporation Law, in that the Retirement Fund seeks to evaluate whether political expenditures are \u201cconsistent with the objective of enhancing stockholder value.\u201d<\/p>\n

A proper purpose has been described by Delaware courts as \u201ca purpose reasonably related to such person\u2019s interest as a stockholder.\u201d Delaware courts have found or indicated that \u201cproper purposes\u201d may relate to, among several other subjects, allegedly improper transactions or mismanagement; unexplained discrepancy in the corporation\u2019s financial statements; the possibility of an improper transfer of assets out of the corporation; and the value of stocks.<\/p>\n

If the Retirement Fund succeeds, similar suits are likely to follow and more public corporations may decide to voluntarily disclose political spending. One can only speculate whether shareholders, lawmakers and regulators will force disclosure of political spending in an effort that they believe will establish checks on corporate political spending so as to protect the interests of shareholders and the public.<\/p>\n

The Retirement Fund is the beneficial owner of 6,121,990 shares of Qualcomm common stock valued at over $378 million, according to the complaint.<\/p>\n","protected":false},"excerpt":{"rendered":"

A \u201cbooks and records\u201d action brought by New York\u2019s comptroller to determine how Qualcomm Incorporated \u201cis spending corporate funds in the political arena\u201d may create a precedent for shareholders seeking to force corporate disclosure of political contributions. The suit was brought last week in Delaware Chancery Court by Comptroller Thomas DiNapoli as trustee of the … <\/p>\n

Continue reading “New York Comptroller Seeks Qualcomm\u2019s Records on Political Giving; SEC Contemplating Political Contribution Disclosure Rules”<\/span><\/a><\/p>\n","protected":false},"author":192,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[141,143,142,144,140,139,145,19,12],"ppma_author":[426],"class_list":["post-66","post","type-post","status-publish","format-standard","hentry","category-capital-markets","tag-220-action","tag-books-and-records-action","tag-christopher-winter","tag-disclosure-of-political-spending","tag-harvard-law-school-forum-on-corporate-governance-and-financial-regulation","tag-political-spending","tag-qualcomm","tag-sec","tag-securities-and-exchange-commission"],"authors":[{"term_id":426,"user_id":192,"is_guest":0,"slug":"cmwinter","display_name":"Christopher M. Winter","avatar_url":"https:\/\/blogs.duanemorris.com\/capitalmarkets\/wp-content\/uploads\/sites\/7\/2015\/01\/winterchristopher-125x150.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/capitalmarkets\/wp-json\/wp\/v2\/posts\/66","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/capitalmarkets\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/capitalmarkets\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/capitalmarkets\/wp-json\/wp\/v2\/users\/192"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/capitalmarkets\/wp-json\/wp\/v2\/comments?post=66"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/capitalmarkets\/wp-json\/wp\/v2\/posts\/66\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/capitalmarkets\/wp-json\/wp\/v2\/media?parent=66"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/capitalmarkets\/wp-json\/wp\/v2\/categories?post=66"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/capitalmarkets\/wp-json\/wp\/v2\/tags?post=66"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/capitalmarkets\/wp-json\/wp\/v2\/ppma_author?post=66"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}