A year after Parkland massacre, gun-makers' reports on safety disappoint shareholder activists

Key Points
  • Gun-makers, resistant to activist shareholder demands from the start, strike a defiant tone in their reports.
  • Shareholders approved the proposals at American Outdoor and Sturm Ruger last year, a process both gun-makers characterized as politically motivated.
  • Both companies say the greatest risk to their reputations is defying their own customers.
A customer looks at guns at a Dick's Sporting Goods Inc. store in Paramus, New Jersey.
Victor J. Blue | Bloomberg | Getty Images

After the shooting massacre of 17 people at a high school in Parkland, Florida, shareholder activists won a fight to force big American gun-makers to study firearms safety and report on whether they were doing enough to reduce gun violence.

The activists hoped it would finally draw the gun industry into a bigger public conversation about the role of guns in American life.

But recently released reports by American Outdoor Brands Corp., the maker of Smith & Wesson, and Sturm Ruger & Co., have disappointed these same activists.

The gun-makers, resistant to the shareholder demands from the start, struck a defiant tone in their reports, arguing that the only constituency relevant to them are gun owners and supporters of the Second Amendment. Fighting gun control proponents, and those who would seek to undo constitutional protections on gun ownership, are an exercise in futility, they said.

"There is little to be gained in trying to win over those fundamentally opposed to private firearm ownership," American Outdoor Brands said in its report, released in recent days.

That the reports exist at all was the result of two years of effort by religious-based activist organizations with the backing of some of the world's biggest asset managers. These shareholders own stakes in public companies and push them to make governance and other changes.

At the beginning of last year, they had already planned to put their demands in front of fellow shareholders at American Outdoor and Sturm Ruger through proxy voting. The mass shooting at Marjory Stoneman Douglas High School one year ago Thursday gave them extra momentum and a national stage.

'Need to take seriously'

The activists say the gun-maker reports fall short of what they wanted, which is an acknowledgment of their role in the national debate on guns.

"They need to take seriously their place in society," said Josh Zinner, CEO of the Interfaith Center on Corporate Responsibility, which coordinates shareholder activism for its members. "They've made it clear that they reject what shareholders have asked them to do."

Shareholders approved the proposals at American Outdoor and Sturm Ruger last year, a process both gun-makers characterized as politically motivated. The activists argued that the companies should address reputation risks, such as gun violence, in order to stay in business.

A spokesman for Sturm Ruger wasn't immediately available for comment.

American Outdoor Brands said in a statement, "Despite the fact that the Resolution was put forward by parties whose interests were not aligned with those of our customers, or those of our shareholders seeking true risk mitigation and value creation, the report represents our good faith effort and investment of company resources."

The company added, "We maintain our long-standing commitment to developing and manufacturing high-quality firearms that operate in a safe and reliable fashion, while encouraging their safe and lawful use."

'Risk' is a matter of perspective

American Outdoor Brands and Sturm Ruger detailed in their reports their efforts to promote gun safety and education, and their research into developing "smart gun" technology, which they said is still impractical and unreliable.

But in addressing issues related to their reputations, the gun-makers said the definition of "risk" is a matter of perspective.

American Outdoor Brands said it hired a media monitoring firm and found that its name was only mentioned 1 percent of the time in media reports related to firearms and crime, even though it made the rifle used in Parkland.

"The conversation around firearm-related violence in the United States is largely an unbranded conversation," the report said. "The Company's reputation as a strong defender of the Second Amendment is not worth risking for a vague goal of improving the Company's reputation among non-customers or special interest groups with an anti-Second Amendment agenda."

Sturm Ruger said in its report, "We believe that the vast majority of stakeholders do not attribute the criminal misuse of a lawfully manufactured and sold firearm to its manufacturer, any more than they believe auto manufacturers are responsible for the criminal misuse of vehicles at the hands of drunk drivers."

Both companies said the greatest risk to their reputations is defying their own customers.

Nineteen years ago, Smith & Wesson learned this the hard way, after signing an agreement with the Clinton administration, which was trying to enact policies to reduce gun violence. It promised to develop "smart gun" technology and sever ties with dealers that sold weapons used disproportionately in crimes. A boycott resulted, and the company nearly went under. It alludes to this period of time in its report.

Sturm Ruger made the same argument, using Dick's Sporting Goods as its cautionary tale. The sporting goods retailer announced in response to the Florida rampage that it would stop selling assault style rifles and high capacity magazines and would only sell guns to those ages 21 and older. That decision cut same store sales, as the company has acknowledged.

'We're not going to give up'

That is the great danger to the survival of gun-makers, the firearms companies argue.

"Consumers of firearms reasonably expect that the Company supports their Second Amendment rights and will offer firearms that satisfy their lawful needs," Sturm Ruger's report said. "If the Company were to unilaterally adopt measures advocated by anti-gun groups (limiting magazine capacity, discontinuing the manufacture and sale of modern sporting rifles, imposing age limits more stringent than federally required on the sale of our products, etc.) this consumer base would likely boycott the Company."

Zinner said his interfaith group will continue to push the companies, through the proxy voting process and by other means. Groups already plan to introduce a proposal concerning human rights at this year's shareholder meetings. He also said they would continue to pursue an active dialogue with the companies.

"I just think of all the people working on this and all the people that have been impacted by gun violence and we just cannot give up," said Sister Judy Byron, the representative of the faith-based groups that put the winning proposal on American Outdoor Brands' proxy last year. "We're not going to give up."