In a report on its own gun-safety measures and the business risks of making guns, the owner of Smith & Wesson claims that the use of its product to kill 17 people in Parkland, Florida, did not hurt its reputation and that the only risk to the company is if customers see it as abandoning the Second Amendment.
The report from American Outdoor Brands [AOBC] was required as part of a successful resolution filed by a group of activist shareholders: Nuns working with the Interfaith Center on Corporate Responsibility (ICCR). Despite the report’s rejection of any need for the company to change its ways, the ICCR told TYT its members are not done using their shares to push for internal change at America’s gun companies.
The report from AOBC came on Friday, less than a week before the first anniversary of the Parkland high school shooting. A Smith & Wesson M&P 15, similar to the AR-15, was used to kill 17 staff and students at Marjorie Stoneman Douglas High School. A similar report forced by shareholders at Sturm, Ruger & Co. [RGR] was also issued Friday.
The AOBC report, however, is openly adversarial toward its own shareholders — rejecting the idea of even researching smart-gun technology — and plants a flag explicitly on the side of the Second Amendment and the National Rifle Association.
The report echoes common themes of the NRA, to which Smith & Wesson has been a significant donor. It says, for instance, “Phrases such as ‘gun violence’ are used to create a perception that the presence of a gun, in itself, somehow creates the conditions for violence.”
Although the company frequently tells investors it wants to expand its customer base, the report says, “The Company’s reputation as a strong advocate of the Second Amendment is not worth risking for a vague goal of improving the Company’s reputation among non-customers.”
It also says lawful gun owners do not blame Smith & Wesson when its guns are used in crimes.
Nevertheless, AOBC does acknowledge it is addressing the financial risks gun makers face. In addition to changing its name from Smith & Wesson, historically associated with guns, in the past four years the company says it has diversified its business. The segment of company revenue generated from outdoor products went from zero to 26 percent in four years, the report says.
The report also says AOBC is openly accepting the risk that a competitor’s research will create practical smart-gun technology. In that event, the report says, AOBC will “move quickly to access that technology if…there is sufficient customer demand.”
As requested by the shareholder resolution, the report says that the company retained a media monitor to examine coverage of gun crime, including Parkland, and found that its brand, Smith & Wesson, was almost never mentioned.
“Smith & Wesson’s visibility within violent crime reporting remained small,” the report found. “In a print media sample of reports focused on violent crime, less than 0.2% of mentions referenced Smith & Wesson. The monthly visibility for Smith & Wesson peaked in March 2018 (as a result of coverage of the Parkland shooting event) at less than 0.3%.”
However, the report also found that one quarter of the time Smith & Wesson was mentioned by traditional print and broadcast media, it included a reference to criminal activity.
The report, compiled and approved by AOBC’s board of directors, pushes back hard against the shareholders who asked for the report. The report mentions several times that most shareholders either opposed the resolution or did not vote either way.
It also implies that the resolution’s sponsors were not acting in “good faith” because they openly support gun control. The report cites the shareholders’ “evasiveness and silence” in response to questions from AOBC, and says the ICCR “should not have” presented its views “without being transparent.”
In a statement to TYT, ICCR CEO Josh Zinner said “We are concerned about AOBC’s dismissive posture towards its shareholders who requested a thorough and sober look at the measures the company is taking to mitigate the risks of the potential misuse of its products resulting in public harm. Rather than provide an authentic review of its business and governance structures to address these safety risks, the company chose to double down on the notion that any exploration of gun safety measures would be construed as a sign of weakness that would alienate its current customer base. This narrow view of their stakeholders and customers is short-sighted at best, and bespeaks a lack of concern for people and communities impacted by gun violence involving its products.”
The report refers repeatedly to the possibility of alienating customers who oppose gun control. “Even the perception among AOBC’s customers that AOBC is undermining their Second Amendment rights could cause immediate and possibly irreparable damage,” it says.
The report also suggests that activists themselves are skewing the media coverage. “For example,” the report says, “Smith & Wesson’s weekly visibility within traditional media doubled as a result of coverage of protests held at the AOBC headquarters in August 2018.”
One reason for coverage of those protests may have been the involvement of David Hogg, a Parkland survivor and now a prominent gun-control advocate.
Referring to the religious group that filed the resolution as “Proponent,” the report says, “This strategy by activists to create media coverage for Smith & Wesson is especially problematic given that activists themselves are creating the very brand reputation threat which the Proponent argues that AOBC must mitigate.”
In fact, last year, after the shareholder resolution passed, the company began including activist shareholders in its boilerplate legal language warning about investor risks. The report does not explain why its pro-gun customer base might be alienated by gun-control activists or protests.
The company still, however, does not warn investors that it might be negatively impacted in the aftermath of shootings using Smith & Wesson guns. TYT’s program, “The News with Dan Rather,” reported first reported the disclosure failures last year. AOBC’s report dismisses the possibility of reputational risk based on Smith & Wesson shootings, based on the media coverage, however it does not address the impact of retailers dropping or curtailing sales of Smith & Wesson guns, as happened after Parkland.
While AOBC has consistently characterized the activist shareholders as holding a minority view, the report does not address the fact that similar concerns that have been voiced by some of its largest shareholders: Private equity firms such as BlackRock and Vanguard.
BlackRock has said it will be more aggressive with gun companies in which it invests. AOBC responded last year by calling BlackRock “politically motivated.”
After the gun industry failed to respond to the Parkland shooting with meaningful changes, one insider at an institutional investor in gun companies told TYT, “Ultimately, it seems like Sturm Ruger and Smith & Wesson are choosing to do nothing. They don’t necessarily feel the need to do anything. That’s a choice…We need to assess all of these choices in terms of: Are you trying to maximize the business? That’s where we are.”
Nevertheless, institutional investors overall do not seem to be a problem for AOBC, even after Parkland. Large interests increasing their stakes in the company recently include Vanguard; Bank of New York Mellon; Deutsche Bank; and TIAA-CREF, which invests retirement funds for millions of teachers.
The report concludes that “AOBC’s reputation among firearm buyers and Second Amendment supporters is more critical to the success of the Company and the enhancement of shareholder value than its reputation among industry detractors and special interest groups with a political agenda.”
AOBC’s management, it says, “remains committed…to working with gun rights groups to ensure that Second Amendment rights are paramount in future policy debates.”
Jonathan Larsen is TYT's managing editor. You can find him on Twitter @JTLarsen.
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