Activists are investing in fossil fuels. And the guns?

The message after a mass shooting, this time in the a Texas Elementary School, it was clear: people who want to curb armed violence should “cast their vote in November”. So said Senator Chuck Schumer, the Senate Majority Leader and New York Democrat, on Wednesday.

But not everyone will have to wait until then. On June 1, when shareholders of Connecticut-based arms manufacturer Sturm Ruger have accessed the company’s virtual annual meeting, they can vote on a shareholder proposal stating that due to the “inherent lethality of firearms,” ​​Ruger must hire an outside company to study its human rights impact, “beyond legal and regulatory issues.”

The human rights study is an unlikely Ruger-like crusade, similar to an effort at Smith & Wesson, another rare publicly traded arms company in a largely privately owned and opaque industry. The non-binding proposals pit a nun, leading one group of activists, and a hospital manager, leading another, against arms manufacturers who have so far not been willing to compromise.

They may not be your typical Ruger investor, but they are representative of a certain type of activist who invests: buying stock in a public company to have a say in how it is run.

Shareholder activism can mean several things. Some activists want to take over a company and govern it differently for financial reasons. Some, like those who push Ruger to study human rights, invest in companies to push them to change on social issues.

On Wall Street, the ESG field is expanding. This represents environmental, social and governance issues in business 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 are agitating for change at all. internal organizations.

In the case of Ruger, an investor group led by CommonSpirit Health, a Chicago-based nonprofit hospital chain, wants the company to perform a human rights impact assessment on its products and business practices. The push is part of a broader effort coordinated by the Interfaith Center on Corporate Responsibility.

Ruger representatives did not respond to calls and emails seeking comment.

“If we can move companies, this is a great lever for systemic change because of the money and power America really has today,” said Laura Krausa, director of advocacy at CommonSpirit.

Ms. Krausa and her allies have little to lose and a growing precedent to follow for successfully pushing corporate behavior.

The growing focus on ESG issues has led banks and other financial firms to cut back on funding for the dirtiest fossil fuels. It has also forced a myriad of companies to diversify their business councils by adding more women and minorities.

The changes made by the resolutions of the individual shareholders were not epochal in themselves. But together they have pushed companies to a greater awareness of how their actions affect the rest of the world.

Shareholders’ willingness to vote in favor of ESG-oriented proposals is growing. In 2021, for example, 44% of Smith & Wesson’s shareholders voted in favor of an investor proposal that the company has a human rights policy. It was more than 36% of shareholders who supported a similar proposal submitted in 2019.

“It’s a kind of 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, Dr. Metzl said, because they can only affect one company at a time, and without broader, more coordinated pressure, individual arms manufacturers have no incentive to act.

Ruger opposes the current human rights proposal and described CommonSpirit’s interest in the company’s actual day-to-day operations as tenuous.

“Despite miniscule ownership of the company’s stock, proponents are using the proxy system to push forward the gun control agenda that they have not been able to get through legislation and other means,” Ruger wrote, urging shareholders to vote against the proposal.

Although it will pass next week, the resolution will not force the company to act. But the view of activist investors is that any kind of influence on the arms industry is better than none.

The recent history of corporate agitation for change, as gun control advocates recount, is largely one of failures.

When Ed Shultz, who was the chief executive officer of Smith & Wesson in the late 1990s, struck a deal with the Clinton administration to take new safety measures for his products, retailers and the National Rifle Association boycotted. the company and nearly bankrupted it, driving Mr. Shultz out of the business.

When companies love Citigroupthe dealer Dick’s sporting goods Other Delta Airlines they declared support for gun control measures and vowed to promote gun safety by changing their business practices, groups like the NRA campaigned against them.

Investors, however, can be harder to ignore. Boards of directors have a duty to listen and respond.

In 2018, a ruling urging Ruger to produce a study on the safety of its products won a majority of shareholder votes and the company responded with two dozen pages. report.

“Criminal misuse of firearms is a complex social issue, resistant to a solution through multiple laws or new technologies,” the report said. “We have long warned that there is no foolproof pistol and there is no substitute for personal responsibility and common sense in the safe handling, use and storage of firearms.”

Activists said he didn’t actually 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 left-wing Majority Action revealed he had worked with eugenics William Shockley in the early 1970s to make his theories of inherently black inferiority publicly palatable.

Mrs Froman said at that time he did not remember working with Mr. Shockley.

Efforts to create board turnover failed. And Ruger, Smith & Wesson tried to fight back. When investor groups began proposing shareholder resolutions, the companies appealed to the US Securities and Exchange Commission to try and take them off their agendas. The SEC refused.

But then, a surprising thing happened: Ruger and Smith & Wesson both began talking to the investors who had made the proposals.

“We didn’t know it could ever happen,” Ms. Krausa said. “I don’t think these companies generally engage in this way.”

In 2019, CommonSpirit proposed for the first time a human rights assessment similar to the one that is on Ruger’s power of attorney this year. Ruger offered to initiate a dialogue if investors withdrew their proposal. They agreed. But the company insisted they sign nondisclosure agreements ahead of the talks. Ms. Krausa said CommonSpirit refused when Ruger asked to speak on the same terms earlier this year.

Sister Judy Byron, a nun who is a member of Sisters Adrian Dominicane, another Ruger and Smith & Wesson shareholder, said she looked at past victories spurred by shareholder activism for inspiration. Resolutions that began in the 1970s urging companies like General Motors to stop doing business in South Africa strengthened the anti-apartheid movement, she said, although it was nearly two decades before their goals were achieved.

“I’ve been doing this job now since 1998 and I’ve really seen the support from other shareholders, the vote, increase,” he said.

Sister Byron and the Adrian Dominican Sisters need further support from other investors, and that support is far from guaranteed.

Large wealth managers such as BlackRock, State Street, Vanguard and Charles Schwab, as well as quantitative fund manager Renaissance Technologies, make up a large portion of Ruger’s shareholders. On Wednesday, Ms. Krausa sent an email to some of these large shareholders asking 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 during which Ms. Krausa and others presented their reasons 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 not clearly defined, too prescriptive, not within the competence of the shareholders or unduly binding on the company. . “

Brian Beades, a BlackRock spokesperson, said BlackRock’s holdings in Ruger did not mean the company had taken an arms investment stance.

BlackRock has found its own ways to express concern about the governance of arms companies. In 2018, after the school shooting in Parkland, Florida, where a gunman killed 17 peopleBlackRock announced it was “engaging”With arms manufacturers to ask questions about their business practices. He said his discussions would remain private.

In 2021, he voted against the re-election of the director of Smith & Wesson who chairs the company’s corporate responsibility committee over concerns about how the company has recognized the risks posed by gun violence. He filed a vote against a Ruger administrator for similar reasons. But the votes were not part of any coordinated campaign and the directors still got the majority of votes.

Defenders like Ms. Krausa know that a human rights report is anything but a law that would, for example, ban AR-15s or require people to be 21 to purchase a semi-automatic weapon. But they see it as better than the current position of the heads in the sand.

“This resolution is poised to help the company understand its role in addressing what is a crisis of colossal proportions,” he said of CommonSpirit’s human rights assessment proposal.

Dr Metzl saw only little prospect of change. It didn’t help, he said, that arms stocks flourished during the coronavirus pandemic, when arms sales increased and the images of people waiting in line around the block to buy them have prompted producers to increase their production.

“We should 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.”