Nuns Meddling Again

You may remember that last year that a group of Catholic nuns sponsored shareholder resolutions at both Ruger and American Outdoor Brands (S&W). The resolutions passed and both companies were forced to issue reports on "gun violence" (sic). According to a letter sent out today by American Outdoor Brands Corporation, they are back again with a new resolution. This new proposal, couched in terms of a UN Human Rights policy, "seeks to impose an obligation for the company to assume liability for undefined “societal impacts” of violence committed with firearms."

Think about that: American Outdoor Brands would be liable for the criminal misuse of Smith & Wesson firearms. No company in its right mind would voluntarily assume such liability. It is as if Ford, GM, Toyota, etc. would now assume the liability for people driving their cars while drunk and injuring or killing someone. It's ludicrous!

Here is the proposal:

RESOLVED: Shareholders request that the Board of Directors of American Outdoor Brands adopt a comprehensive policy articulating our company’s commitment to respect human rights, and which includes a description of proposed due diligence processes to identify, assess, prevent and mitigate actual and potential adverse human rights impacts.

WHEREAS,

The UN Guiding Principles on Business and Human Rights (hereinafter UNGPs) state:

The responsibility to respect human rights requires that business enterprises: (a) Avoid causing or contributing to adverse human rights impacts through their own activities, and address such impacts when they occur; [and] (b) Seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts.

In order to meet their responsibility to respect human rights, business enterprises should have in place policies and processes appropriate to their size and circumstances, including . . . [a] policy commitment to meet their responsibility to respect human rights.

As investors, we seek to identify and assess human rights risks and impacts in portfolio companies as they have direct implications for shareholder value and, depending on whether and how they are managed, are a bellwether for a company’s long-term viability.

Given the lethality of firearms products and the potential for their misuse, in direct contradiction with the company’s stated objective of providing “next-generation guns for sport, recreation, protection and personal use”, the risk of adverse human rights impacts is especially elevated for all gun manufacturers, including American Outdoor Brands.

Companies exposed to human rights risks may incur significant legal, reputational and financial costs that are material to investors. A public-facing human rights policy that includes a human rights due diligence process is essential to managing these risks. For this reason, hundreds of global corporations have adopted human rights policies, including British American Tobacco, Exxon and Walmart.

The Board of Directors are not amused by the Sisters of the Holy Names of Jesus and Mary, U.S.-Ontario.

Proponent’s Resolution and supporting statement cites the UN Guiding Principles on Business and Human Rights and uses vague terms that do not alert shareholders to the specific obligations the Resolution, if adopted, would impose on our company. The Proponent discusses a “human rights policy” and “human rights risks” but nowhere are those terms explained. Given that the Proponent is a signatory to a statement seeking the regulation of the private ownership of firearms, their failure to explain the specific application of their proposal to our company is, by itself, a significant deficiency in the proposal and reason for rejection. But even worse is that the Resolution requires our company to address all of what Proponent would claim are the societal impacts of violence committed with firearms, beyond any legal obligation to do so. Simply put, the Resolution if adopted could potentially hold our company responsible for the illegal misuse of firearms and the violence associated with such misuse.

Similarly, Proponent insists on “due diligence processes to identify, assess, prevent and mitigate actual and potential human rights impacts.” Again, not a single one of these terms is defined or explained by Proponent. The Proponent’s failure to explain and define their request makes it quite literally impossible for anyone to understand not only what Proponent would claim is the scope of the obligation, but also its costs.

The full letter and proposal can be found here.

While many investment companies voted with the nuns last year, I would hope that they have the good sense to realize the implications of the passage of such a dangerous proposal. It is nothing less than a call for the destruction of a company founded more than a century and a half ago. Though raised and still nominally a Catholic, I am having less than pious thoughts about this group of nuns and those that would vote with them.