(Reuters/Rick Wilking.)
In the Citizens United era, with billionaires and big business out to buy our elections wholesale, defending our democracy will take every weapon in our arsenal. Fortunately, a local elected official has just come up with a new one.
Last week, New York State Comptroller Thomas DiNapoli brought suit in Delaware’s Chancery Court to force the tech company Qualcomm to provide information about its political donations. Qualcomm, like about half of all US corporations, is based (on paper) in Delaware. DiNapoli is the sole trustee of the New York State Common Retirement Fund, a public employee pension fund holding $378 million in Qualcomm stock. So he’s been seeking information from the companies the fund invests in about their political spending. Over the past two years, the fund has pushed twenty-seven pro-disclosure shareholder resolutions, leading to settlements with ten companies. Qualcomm proved more stubborn.
“In the case of Qualcomm,” says DiNapoli, “we had a company that was particularly resistant to our entreaties for disclosure as a shareholder. They don’t score well relative to other companies with regard to this issue. So we thought about trying a new tactic, and that is using the privileges we have under Delaware law” to trigger “a mechanism that shareholders can use if they have concerns about how a company is spending their money.” He adds that while his lawsuit “may be a novel strategy, in the aftermath of Citizens United, there’s heightened concern about where this money is going.”
What DiNapoli is seeking is eminently reasonable for any shareholder to expect—especially one charged with safeguarding the retirement of over a million workers and retirees. “When you can’t get access to this information voluntarily,” says DiNapoli, “it certainly seems to me to be a logical extension of what is provided for under a ‘books and records action’ ” within Delaware law. Others agree: Former SEC Chair Harvey Pitt, who served under President George W. Bush, told The New York Times, “I don’t want to predict where the Delaware court will come out, but where you have a very large shareholder and something directly related to corporate governance, it seems to me a pretty compelling circumstance…”
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The lawsuit against Qualcomm is also supported by the logic of the Citizens United decision itself. Justice Kennedy’s majority opinion in that case, which opened the dark money floodgates, expressed confidence that corporations would disclose much of that spending. But as DiNapoli notes, “we’ve not seen that to be the case with many corporations.”
Any publicly traded company making political contributions, says DiNapoli, should be able to answer shareholders asking, “How is that enhancing the value of the money that we have invested with you?” But, “many corporations really aren’t prepared to adequately answer that question.” DiNapoli points out that recent research suggests that political spending is negatively correlated with business success, and cites the consumer and media backlash that Target faced after news broke that it had contributed to a PAC backing an anti-gay gubernatorial candidate. “A company that’s not willing to engage in disclosure,” says DiNapoli, “does raise a lot of flags in my mind.”
While progressive shareholder activism has been on the rise for years, DiNapoli says this shareholder lawsuit appears to be the first of its kind. If successful, it could inspire others to follow suit. Delaware (as Jonathan Chait noted in his classic indictment of the state) is no paragon of progressive corporate regulation. But its law offered it an opening, and DiNapoli has wisely taken it. I hope many others will, as well.
For America’s pro-democracy movement, the comptroller’s move comes at a moment of urgency and opportunity. Big money failed to decide the presidential election, but played a key role in maintaining the obstructionist GOP House Majority. Over 350 towns and cities have passed resolutions calling for a constitutional amendment to overturn Citizens United. Free Speech for People and Avaaz have launched a petition on the White House website calling for President Obama to “use the State of the Union to call for a constitutional amendment to get big money out of politics.” On January 19—pegged to Martin Luther King Day, Citizens United’s third birthday, and President Obama’s second inauguration—activists in sixty cities will hold a Money-Out/Voters-In Day, demanding a pro-democracy amendment, public funding for public elections, and expanded voter rights.
Disclosure alone won’t solve the problem. We need robust public financing of our elections. But disclosure campaigns help to mitigate the damage, and to fuel momentum for the broader reform we so desperately need.
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