Americans for Tax Reform announced a new project designed to counter activist investors who have passed resolutions potentially damaging to gun companies and other corporations as a means of achieving a political goal.
"ATR feels there is a need to protect the long-term interests of small investors and pension fund beneficiaries from activist shareholders, proxy advisory firms and Washington proposals that use financial institutions as the venue to enact the social and political agenda of few, that cannot be accomplished through the legislative process," James Setterlund, executive director of the newly formed Shareholder Advocacy Forum, told the Washington Free Beacon. "The Shareholder Advocacy Forum will provide a voice for these shareholders and hold executives and directors accountable when they prioritize activist proposals ahead of their fiduciary responsibility."
Publicly traded gun manufacturers have been a recent target of these investors. Smith & Wesson’s parent company was recently forced to conduct a study about the viability of "smart guns" and the reputation risks of selling firearms despite the company opposing the move.
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"Today's report complies with a Resolution that was passed by a small percentage of our shareholders in September," American Outdoor Brands told the Free Beacon in February. "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. Its contents demonstrate that our reputation with our customers for protecting their Second Amendment rights, and our ability to manufacture the high-quality firearms they want to purchase, are paramount to sustaining and growing our market share and stockholder value."
The study ultimately found "smart guns" were not a viable product and consumers don't blame the gun company for crimes committed with its products by a third party.
The group who forced the report is called the Adrian Dominican Sisters, a small group of about 600 women who decry "easy access to guns" as responsible for gun crimes. It has targeted gun groups as well as a range of other companies by becoming marginal shareholders in order to offer resolutions in line with its political beliefs.
"When I say that I've always been interested in social justice, it isn't just to know about it and be aware of it, but to bring about change and bring about justice," Sister Judy Byron, a spokesperson for the group, told NBC News. "We're looking to change the system."
Instead of being responsible to the company's shareholders, Byron said she wants the company to be held responsible for gun crimes.
"I think it can't just be about their fiduciary responsibility, but what is their responsibility to society? The costs of gun violence, the loss of life, all the expense to our health care system," she told BuzzFeed in 2018.
ATR wants to counter groups like Byron's and said it intends to protect the long-term interests of shareholders. The new Shareholder Advocacy Forum said it will take a number of different steps to effectively negate the efforts of these activists, including opposing legislation the group believes will be used by them. They sent their first letter opposing legislation to members of the House Financial Services Committee last week to voice their concerns with H.R. 2364.
H.R. 2364, the Investor Choice Against Gun Proliferation Act, would require financial institutions to file disclosures that indicate if they have "substantial financial relationship with manufacturer or dealer of firearms or ammunition." Setterlund said the legislation would not protect investors but lead to further demonization of the firearms industry.
"The project launched with a letter of opposition to H.R. 2364 because we feel that private businesses should not be forced to disclose who they do business with and the Securities and Exchange Commission would be politicized by forcing the regulator to monitor which companies do business with businesses in the firearms industry," he told the Free Beacon.
Setterlund told the committee he believes legislation like H.R. 2364 would politicize the SEC and lead the financial regulator to become an enforcement mechanism for some politicians’ social agendas.
"Disclosing this information is best determined by shareholders, instead of putting the government between private enterprises and its supporters," he wrote to the committee. "I believe this bill would open the door for future legislation to compel the SEC, or any other government agency, to engage in social oversight and force businesses to alter how they conduct their operations. I am concerned this legislation provides a model for future bills that effectively delegate Congress's legislative duty to agencies by placing them in charge of enacting some member’s social priorities."
He said the Shareholder Advocacy Forum will continue to send letters to lawmakers whenever there is legislation the group believes is helpful or harmful to their cause.
"The Forum will be an advocate of legislation and regulation that preserves shareholders' rights and businesses' ability to access capital through the public marketplace," Setterlund told the Free Beacon. "The Forum will also provide recommendations for and against shareholder proposals that would force a company to take a stance on an unrelated social policy or other issue, potentially putting its employees and shareholders at odds with many of their customers."
However, he also said the Forum will rate shareholder proposals, watch proxy adviser firms for potential political bias, and educate shareholders on the importance of being involved in the voting process for the companies they’re invested in.
"SAF plans to hold directors and executives accountable when they place the social agenda of some ahead of their fiduciary duty to all shareholders," the Forum said of its mission in a statement on its launch.