When Smith & Wesson’s owner was pressed by fund manager BlackRock last year about how use of its guns in mass shootings might tarnish the company’s reputation, top brass made clear that the opinions of customers outweighed those of critics.
The Springfield, Mass.-based company hasn’t changed its mind.
The real risk, the gunmaker said in a February report requested by a group of Catholic nuns at its 2018 shareholder meeting, is losing the support and confidence of its customers and other defenders of the Second Amendment, the constitutional provision that guarantees U.S. citizens the right to bear arms.
“Maintaining its reputation among that audience is essential to protecting the investment interests of the company’s shareholders and its position in key markets,” Smith & Wesson parent American Outdoor Brands wrote. Alienating them, on the other hand, might cause “immediate and possibly irreparable damage,” something an earlier incarnation of Smith & Wesson learned the hard way.
Nineteen years ago, as the gunmaker faced a barrage of government lawsuits, senior managers struck an agreement with then-President Bill Clinton to improve safety measures and wound up in the sights of the National Rifle Association, which accused the company of “running up the white flag of surrender.”
Sales plummeted and the business’s value shrank, leading to its takeover at a fire-sale price.
Its reputation today as a strong defender of the Second Amendment is too valuable to risk for the “vague goal of improving the company’s reputation among non-customers or special-interest groups with an anti-Second Amendment agenda,” the gunmaker wrote in an introduction that made pointedly clear it was providing the report only because a majority of voting shareholders backed the nuns’ request.
The vote, in September 2018, came amid an increasingly heated debate over how far the Second Amendment’s guarantees should extend, with some businesses and voters favoring age limits on weapon sales and expanded background check requirements while others ardently oppose any tightening of existing regulations.
It followed a string of mass shootings including one at a South Florida high school, where 17 students and teachers were shot to death on Valentine’s Day and survivors began campaigning for new gun safety laws. While no such bills were passed, retailer Dick’s Sporting Goods stopped selling weapons to customers under 21 and other businesses pulled away from marketing deals with the National Rifle Association.
The suspect in that case was carrying an AR-15 made by American Outdoor Brands, police said, and had received marksmanship training in a program supported by the NRA Foundation.
“The majority of guns used in crimes in major U.S. cities” are made by American Outdoor Brands, Sister Judy Byron, an Adrian Dominican nun, told investors at the company’s shareholder meeting shortly before a 52 percent majority passed a resolution requesting the report.
The measure, proposed by Sisters of the Holy Names of Jesus and Mary, U.S.-Ontario, which owned 200 shares at the time, asked the company to assess its monitoring of violent crimes in which American Outdoor products were used, its efforts to research and manufacture safer guns, and the potential risks to its reputation and finances from gun violence.
“Each event brings new threats of lawsuits, boycotts, divestment, and demonstrations — and along with them, a wave of damaging news stories about gun companies and their inability to make their products safer for civilians, and most critically, to help prevent their misuse by children,” Byron said, urging shareholders to back the proposal.
Byron declined to comment on the resulting report, which she said she and others who requested it are still reviewing.
Sisters of the Holy Names engages in such shareholder activism efforts with the Interfaith Center for Corporate Responsibility. The organization invests pensions on behalf of religious groups and uses its resulting status as a stockholder to advocate for changes in corporate behavior, a practice that chafed American Outdoor Brands and has irritated other corporations encountering it.
In response, lobbyists have been urging the Securities and Exchange Commission to raise the minimum ownership stake necessary for shareholders to file such proposals.
Currently, any individual with at least $2,000 worth of shares can do so, and activists on both sides of the political spectrum have used the low threshold to push ideologically driven measures from environmental safety improvements to equal pay.
Indeed, American Outdoor Brands noted in a regulatory filing that although the nuns won a majority, the total votes for and against the measure reflected only about 53 percent of eligible shareholders. It’s a phenomenon acutely familiar to U.S. politicians, who invest heavily in making sure their supporters show up at the polls on Election Day.
Since the gunmaker expects more such proposals in the future, it included in the report a list of 10 principles that management wants investors seeking to influence the company to acknowledge. Those include the company’s belief that its customers expect it to support the Second Amendment and its commitment to oppose any efforts to restrict gun rights.
At the same time, Smith & Wesson’s owner said, it will consider “any good-faith proposal” to curb violent crime that doesn’t conflict with its standards.
In the same vein, American Outdoor Brands repeatedly referenced a movement to ban private gun ownership and included information in the report that it said would help readers determine whether the nuns supported that agenda.
Those include a position statement from the Interfaith Center calling for gunmakers to stop building and selling “military style semi-automatic assault weapons” and for retailers to stop selling guns and ammunition to anyone under 21.
American Outdoor Brands, which changed its name from Smith & Wesson Holding Corp., benefited from fears of such a ban during Barack Obama’s eight-year presidency, with growing sales fueling a surge in its stock price and that of rival Sturm, Ruger & Co.
Shares in both firms have pared those gains since President Trump, a gun rights supporter, took office in 2017.
Support for gun restrictions from voters, many of whom keep firearms themselves, is varied. A report from the Pew Research Center in 2017 showed a majority of Americans believe society at large views gun ownership negatively but that their individual communities, particularly in rural areas, have a more favorable opinion.
The Crime Prevention Research Center, a research group founded by gun rights advocate John Lott, says the number of concealed-carry permits — a statistical proxy for gun ownership — rose to 17.2 million in the U.S. in 2018, more than three times as many as in 2007.
For its part, American Outdoor Brands “disagrees that it must adopt elements of a gun-control agenda, or otherwise appease factions that are fundamentally opposed to private gun ownership,” executives said in the report. The company believes its customer base of “knowledgeable, law-abiding firearms purchasers does not blame Smith & Wesson, or any other firearms brand, for the malfeasance of criminals or the actions of the mentally or emotionally impaired.”
To the contrary, the company argued, such customers “are more inclined to support greater access to firearms by private citizens to help prevent and protect themselves from these tragedies.”
