The message after a mass shooting, this time at a Texas elementary school, was clear: people who want to curb gun violence should “cast their votes in November.” Senator Chuck Schumer, the majority leader of the Senate and Democrat of New York, said on Wednesday.
But not everyone has to wait until then. On June 1, when the shareholders of Connecticut-based arms manufacturer Sturm Ruger log into the company’s virtual annual meeting, they will be able to vote on a shareholder proposal stating that because of “the inherent lethality of firearms,” Ruger must hire an outside company to handle the to study its impact on human rights, “on top of and beyond legal and regulatory matters.”
The human rights study is an unlikely crusade at Ruger, akin to an attempt at Smith & Wesson, another rare publicly traded weapons company in a largely private and opaque industry. The non-binding proposals pit a nun, who leads one activist group, and a hospital director, who leads another, against arms manufacturers who have so far refused to compromise.
They may not be typical Ruger investors, but they are representative of a certain kind of activist investing: buying stock in a publicly traded company to have a say in how it is managed.
Shareholder activism can mean several things. Some activists want to take over a company and run it differently for financial reasons. Some, like those who urge Ruger to study human rights, invest in companies to drive change on social issues.
On Wall Street, the field of ESG is expanding. That stands for environmental, social and governance issues in corporate management, and making decisions with an ESG perspective leads some investors to avoid certain sectors, such as fossil fuels, private prisons and tobacco, while others advocate for change within organizations.
In Ruger’s case, a group of investors led by CommonSpirit Health, a Chicago-based nonprofit hospital chain, wants the company to conduct a human rights impact assessment for its products and business practices. The push is part of a larger effort coordinated by the Interfaith Center on Corporate Responsibility.
Ruger representatives did not respond to phone calls and emails asking for comment.
“If we can move companies, that’s a really big leverage point for system change because of the money and power that corporate America really has today,” said Laura Krausa, CommonSpirit advocacy director.
Mrs. Krausa and her allies have little to lose and a growing precedent for successfully driving corporate behavior.
The increasing focus on ESG issues has led banks and other financial firms to cut funding for the dirtiest fossil fuels. It has also forced countless companies to diversify their boards of directors by adding more women and minorities.
The changes brought about by individual shareholder decisions have not been significant in themselves. But together, they have pushed companies to become more aware of the impact of their actions on the rest of the world.
The willingness of shareholders to vote in favor of ESG-oriented proposals is increasing. For example, in 2021, 44 percent of Smith & Wesson shareholders voted in favor of an investor proposal to allow the company to pursue a human rights policy. That was more than the 36 percent of shareholders who supported a similar proposal in 2019.
“It’s kind of a Hail Mary,” said Dr. Jonathan Metzl, director of the Department of Medicine, Health and Society at Vanderbilt University, whose research focuses on weapons in America. Shareholder resolutions are weak, said Dr. Metzl, because they can influence only one company at a time and, without broader, more coordinated pressure, individual arms manufacturers have no incentive to act.
Ruger opposes the current proposal on human rights and has described CommonSpirit’s interest in the day-to-day running of the company as weak.
“Despite minuscule ownership of company stock, proponents use the proxy system to advance the gun control agenda that they have been unable to achieve through legislative and other means,” Ruger wrote, urging shareholders to vote down the proposal.
Even if passed next week, the resolution won’t force the company into action. But the view of activist investors is that any kind of influence on the arms industry is better than none at all.
The recent history of corporate change agitation, as gun control proponents tell it, is largely a history of failure.
When Ed Shultz, who served as CEO of Smith & Wesson in the late 1990s, struck a deal with the Clinton administration to introduce new security measures for its products, retailers and the National Rifle Association boycotted the company and nearly bankrupted it, leaving the company behind. Mr. Shultz from the industry.
When companies like Citigroup, retailer Dick’s Sporting Goods and Delta Air Lines have expressed support for gun control measures and vowed to advance gun safety by changing their own business practices, groups like the NRA have campaigned against them.
However, investors can be harder to ignore. Boards have a duty to listen and respond.
In 2018, a measure urging Ruger to conduct an investigation into the safety of its products won a majority of shareholder votes and the company responded with a twenty-page report.
“The criminal misuse of firearms is a complex social issue, resistant to resolution through more laws or new technologies,” the report said. “We have long warned that there is no such thing as a foolproof weapon, and there is no substitute for personal responsibility and common sense in the safe handling, use and storage of firearms.”
Activists said it didn’t really answer their questions, but at least it was a start.
Some investors have also campaigned to remove Ruger’s board members, including Sandra S. Froman, the former president of the National Rifle Association, who, according to leftist group Majority Action, had worked with eugenicist William Shockley in the early 1970s. for his theories about the inherent inferiority of black people to be publicly digestible.
Ms. Froman said at the time that she could not remember working with Mr. Shockley.
Attempts to create managerial turnover failed. And Ruger and Smith & Wesson tried to fight back. When the investor groups first began proposing shareholder resolutions, the companies appealed to the U.S. Securities and Exchange Commission to try and remove them from their agenda. The SEC declined.
But then something surprising happened: Ruger and Smith & Wesson both entered into discussions with the investors who made the proposals.
“We didn’t think it would ever happen,” Ms. Krausa said. “I don’t think these companies usually engage in this way.”
In 2019, CommonSpirit first proposed a human rights assessment, similar to what is on Ruger’s proxy this year. Ruger offered to enter into a dialogue if the investors withdrew their proposal. They agreed. But the company insisted that they sign nondisclosure agreements before the talks. Ms. Krausa said CommonSpirit declined when Ruger asked to talk on the same terms earlier this year.
Sister Judy Byron, a nun who is a member of the Adrian Dominican Sisters, another shareholder of Ruger and Smith & Wesson, said she looked to past victories spurred on by shareholder activism for inspiration. Resolutions that began in the 1970s urging companies like General Motors to stop doing business in South Africa fueled the anti-apartheid movement, she said, even though nearly two decades passed before their goals were achieved.
“I’ve been doing this job since 1998 and I’ve really seen the support from other shareholders, the votes, increase,” she said.
Sister Byron and the Adrian Dominican Sisters do need additional support from other investors, and that support is far from guaranteed.
Major asset managers such as BlackRock, State Street, Vanguard and Charles Schwab, as well as quantitative fund manager Renaissance Technologies, make up a large proportion of Ruger’s shareholders. On Wednesday, Ms. Krausa emailed some of these major shareholders for their support.
Representatives from each of the companies said they could not comment on how they would vote. But on Thursday, Vanguard executives held a phone call in which Ms. Krausa and others argued for the assessment.
BlackRock voted against a similar measure proposed for Smith & Wesson in 2020, noting in a summary of its voting decisions that year that “the request is either not clearly defined, too prescriptive, not in the view of shareholders, or restricts the business unnecessarily.”
Brian Beades, a BlackRock spokesperson, argued that BlackRock’s possession of Ruger did not mean that the company had taken an active investment position in weapons.
BlackRock has found his own ways of expressing concerns about gun company governance. In 2018, after a school shooting in Parkland, Florida, where a gunman killed 17 people, BlackRock announced it was “talking” to gunmakers to ask questions about their business practices. It said its discussions would remain private.
In 2021, it voted against the re-election of the Smith & Wesson director who chairs the company’s corporate social responsibility committee over concerns about the company’s recognition of the risks of gun violence. It voted against a Ruger director for similar reasons. But the votes were not part of a coordinated campaign and administrators still won a majority.
Proponents like Ms. Krausa know that a human rights report is far from a law that would, for example, ban AR-15s or require people to be 21 to buy a semi-automatic weapon. But they see it as better than the current attitude of heads in the sand.
“This resolution is poised to help the company understand their role in addressing a crisis of colossal proportions,” she said of CommonSpirit’s human rights assessment proposal.
dr. Metzl saw few prospects for change. It didn’t help, he said, that arms stocks were thriving during the coronavirus pandemic, when arms sales skyrocketed and images of people queuing to buy them prompted manufacturers to increase production.
“We have to try everything we can,” he said, “but I would say that if this is the only way, it is a reflection of a much bigger problem.”
