Can Shareholders Make Guns and Gun Companies Safer?

american outdoor brands

VEA Vice Chair Nell Minow writes on Medium:

majority action aobc stock price

In May, I wrote about shareholder initiatives at gun manufacturer Sturm, Ruger & Company to improve the board of directors and get better information about safety measures and mitigation of harm associated with company products, including efforts to improve gun safety and assessment of the corporate reputational and financial risks related to gun violence in the U.S. The proposal was successful, with 7.2 million votes in favor and 3.3 million votes cast against.

And now, one of the groups behind this initiative, Majority Action, has published a new Shareholder Advisory about another gun company, calling American Outdoor Brands’s (AOBC) investor disclosures “incomplete and potentially misleading.” Majority Action says that in addition to the poor stock price performance shown above, AOBC:

Did not adequately disclose millions in political expenditures, even after a majority of voting shareholders backed a resolution calling on them to do so. Their published political spending reports conceal that they may fairly be called intentionally obfuscatory. For example, AOBC says:

The Company belongs to various trade associations and trade groups. The Company believes that these organizations help advance a long-term public policy agenda helpful to the Company’s business interests and goals because the Company’s positions on public policy issues are often communicated through these organizations, which enables the Company to reach government officials more efficiently and in concert with industry partners. However, the Company’s positions do not always align with the positions taken by these organizations.

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Failed to disclose to shareholders that a key AOBC board member also serves as a director of a public company in an adjacent/competitive industry — despite SEC rules requiring such a disclosure. The reason these disclosures are required is to inform investors of any potential conflicts of interest that could interfere with a board member’s ability to act solely on behalf of investors. Here, the undisclosed affiliation may be connected to AOBC’s decision to withdraw from a business it previously claimed to be very competitive.

AOBC director Mitchell Saltz serves on the board of publicly-traded VirTra Inc., which appears to have directly competed with AOBC in marketing training services to police agencies. AOBC did not disclose this public company board service to shareholders in its proxy statement biography of Saltz in 2017 or 2018, despite SEC rules requiring such disclosure. AOBC long promoted its Smith & Wesson Academy (“SWA”) as a provider of “state-of-the-art” training for police and security personnel from all 50 states and more than 50 foreign countries. Yet less than two years after Saltz joined the VirTra board, SWA shut its doors.

AOBC has taken the very unusual tactic of claiming that a non-binding shareholder resolution intended to reduce investment risk is itself posing a risk to share value. The Interfaith Center on Corporate Responsibility shareholder resolution calls for greater disclosures about gun violence and safety. It is important to note that even a 100 percent vote in favor of this resolution is advisory only. As AOBC has already demonstrated, corporate executives and directors can ignore majority-supported shareholder resolutions. So it is rather extreme for the company to warn that support for the resolutions could result in significant harm to the company, including “consumer boycotts of our products.” Indeed, it is the risk of consumer boycotts of the products that investors are trying to prevent by encouraging AOBC to produce safer guns.

Majority Action notes that “a more complete description of this risk, we think, should emphasize the role of the NRA in nearly bankrupting Smith & Wesson after the company embraced gun safety reforms and technology.”

Majority Action further highlights concerns about the lack of independent oversight in the company’s stale and insular board of directors. Despite established corporate governance best practice that no former executives serve on the board, three of the AOBC’s nine board members (not including the CEO) are current or former executives, and five directors are further connected to each other through their service as officers and directors of an unprofitable micro-cap company called Quest.

AOBC has its annual meeting on September 25th. BlackRock, Vanguard, and Invesco together hold around 27 percent of the shares at the company. Investors and pension plan participants whose funds are managed by those firms can inquire about how their stock in this company is being voted.

guns and pensions

NOTE: VEA Vice Chair Nell Minow has a connection to Majority Action as she serves on the board of a non-profit focusing on shareholder initiatives about climate change that is being transferred to their group.

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