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Shareholder Activists Turn Attention to Gun Violence

Deadly mass shootings this year in places like El Paso and Dayton have yet to produce new gun-safety laws in the United States. Instead, Capitol Hill appears to be taking a backseat to corporate shareholders in pushing for stronger gun control policies.

Take the annual stockholders meeting of Nevada-based American Outdoor Brands Corp. this week. The only shareholder proposal on the agenda of the Smith & Wesson manufacturer came from U.S.-Ontario chapter of the Sisters of the Holy Names of Jesus and Mary, a Catholic organization that describes itself as “dedicated to the full development of the human person through education, social justice, contemplation, and the arts.”

Although the proposal didn’t mention firearms specifically, it’s not hard to see what the Sisters were getting at. The measure called for American Outdoor Brands to adopt a policy “articulating our company’s commitment to respect human rights.” Additionally, the proposal included a request for “a description of proposed due diligence processes to identify, assess, prevent and mitigate actual and potential adverse human rights impacts.”

The Sisters essentially framed gun violence as a risk factor that could affect shareholder value, noting that “companies exposed to human rights risks may incur significant legal, reputational, and financial costs that are material to investors.” Not surprisingly, the board of directors at American Outdoor Brands opposed the proposal in no uncertain terms, dismissing it as an end run around “Americans’ constitutional right to keep and bear arms.”

The American Outdoor Brands board may have an accurate read on the underlying motivations behind the Sisters’ latest shareholder proposal, but consider that publicly traded companies have started citing mass shootings as a risk factor in corporate filings. Restaurant chains such as Dave & Buster’s Entertainment Inc. and The Cheesecake Factory Inc. have included active-shooter notes in recent disclosures. The same goes for retailers like Walmart Inc., which actually had active-shooter situations in its stores recently, and Dillard’s Inc., which adjusted its forward-looking information disclaimer.

If these companies view the potential for gun violence as a reputational risk that must (or at least should) be disclosed, it’s arguable that manufacturers of weapons used in mass shootings should go much further. American Outdoor Brands already published a report earlier this year on product safety in response to a 2018 shareholder proposal put forward by the Sisters. Shareholders of gun maker Sturm, Ruger & Co., meanwhile, overwhelmingly passed a resolution in 2018 requiring it to publish a report “on its activities related to safety measures and mitigation of harm associated with company products.”

In fact, keep an eye out for activists to begin using shareholder proposals more aggressively to beef up gun control through more indirect channels. Visa Inc., for example, is facing a shareholder proposal to produce a report on risks to its business “from mounting public scrutiny of the role played by credit card issuers and payment networks in enabling purchases of firearms, ammunition, and accessories used to commit crimes, including mass shootings, and the steps Visa is taking to mitigate those risks.”

Corporate directors who aren’t willing to work with activists on gun issues should also be prepared to face opposition from shareholders. After the vote last year requiring Sturm, Ruger & Co. to produce a gun safety report, for instance, the Interfaith Center on Corporate Responsibility called the company’s response “wholly inadequate” and asked shareholders to withdraw support for two board members. It singled out Chairman Michael Jacobi and board member Susan Froman, who the ICCR accused of advancing “pseudoscientific racist views regarding the supposed genetic inferiority of African Americans.” ISS appeared to agree with the assessment. The proxy advisor recommended a withhold vote against three directors.

We can expect this type of activist pressure to continue—at least as long as mass shootings keep happening, and as long as Congress keeps taking no action in response.

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