BlackRock and Vanguard: Time to Hold the Sturm Ruger Board Directors Accountable
This week Sturm Ruger, one of the country’s largest gun manufacturers, filed a proxy statement in anticipation of its annual general meeting on May 8, asking shareholders to reject proxy adviser Institutional Shareholder Services (ISS)’s recommendations to vote against three of the company’s directors. Though the gunmaker has failed to respond adequately to shareholder concerns on gun safety and long-term shareholder value, Sturm Ruger is still trying to avoid accountability. The world’s largest investor, BlackRock, owns a whopping 18% of the company, and made a big show of concern for gun safety in the wake of the Parkland massacre. But even though Sturm Ruger refused to engage with investors on these critical issues, BlackRock and Vanguard rubber-stamped all the company’s directors anyway.
The big question now: will BlackRock and Vanguard, which together own 28% of Sturm Ruger’s outstanding shares, actually use their power responsibly and hold the board accountable?
Sturm Ruger has been under significant pressure from shareholders to engage responsibly around questions of gun safety and long-term shareholder value, with 68% of shareholders voting for a resolution backed by the visionary religious investors affiliated with the Interfaith Center on Corporate Responsibility (ICCR). As Majority Action and ICCR noted in our April 2019 investor advisory, and as ISS correctly assessed, Sturm Ruger’s response to the 2018 shareholder resolution consisted of little more than boilerplate excuses rather than serious engagement with the company’s responsibilities and opportunities to improve public safety and long-term shareholder value.
Constructed around false, incendiary attacks from perceived opponents, the Ruger statement was a strong signal to shareholder activists that our second push is gaining momentum to hold the board accountable for prioritizing politics over long-term shareholder value creation and social responsibility.
While no one is surprised that Ruger’s board is trying to (quite dramatically) defend the company’s deeply problematic status quo, the letter to shareholders is misleading and in some places false.
Ruger’s report demonstrated a clear disregard for taking steps to mitigate the risk that its products can pose to public safety, and the board has yet to identify any meaningful efforts it has considered to monitor its distribution chain for improving gun safety. Instead Ruger leadership continues to reject out-of-hand the potential to create a safer product and improve the company’s long-term shareholder value by advancing smart gun technology.
And indeed, before issuing its recommendation against several directors, ISS discussed the Ruger report and the investor advisory with both the ICCR member shareholder proponents and representatives of Majority Action.
To make matters worse, Sturm Ruger has STILL failed to answer critical questions about director and NRA leader Sandra Froman concerning her potential conflicts of interest, history of racist activity, and undisclosed leadership in a secretive organization tied to extremists and conspiracy theorists. Froman is a champion of the NRA’s 2000 effort that nearly bankrupted Smith & Wesson after the gunmaker tried to adopt a more socially responsible approach.
Rather than attack Majority Action for a mythical “anti-gun agenda,” Sturm Ruger would be better served by engaging meaningfully with shareholders and working to maximize shareholder value through safety innovation and responsible risk oversight. But clearly the board is more interested in its short-termist strategy of fear-based sales targeted at their existing customer base. This is why we and ICCR have all called on shareholders to hold the board accountable and withhold support from Ruger directors C. Michael Jacobi, John Cosenstino Jr., Amir Rosenthal, and Sandra Froman on May 8.
