Divestment the way to silence NRA

By Joe Nocera / BloombergLast Thursday was the day all right-thinking people were supposed to #boycottAmazon because of its refusal to drop the National Rifle Association’s television channel from its streaming service. So naturally, when my young son asked me if I would please, please, please buy him a new Beyblade, there was never any doubt I was going to buy it from Inc. While I was at it, I got the new Richard Nixon biography for my wife. Spent about $50 in the space of 10 minutes.

I did so not because I’m pro-NRA, but because I can’t think of a less effective way to bring about the changes the vast majority of Americans want, and which was the purpose of the boycott: a defanged NRA, along with sensible gun laws that eliminate mass shootings and reduce gun violence.

Would removing NRATV from Amazon (or Apple’s streaming service, which was also a target of Thursday’s boycott) make the NRA’s message less visible? No. Just Google “NRATV” and you’ll see what I mean. Secondly, in refusing to take down NRATV, Amazon is upholding important free-speech principles, which Amazon’s founder, Jeff Bezos, clearly cares a great deal about. (He owns The Washington Post.) And third, the call for removing NRATV is a perfect example of the kind of liberal intolerance that emboldens critics like the NRA rather than weakens them.

Which is not to say we should throw up our hands, which has been the primary response to mass shootings in the nearly five years between April 2013 — when a background-check bill lost in the Senate four months after the Sandy Hook massacre — and the Parkland, Fla., mass shooting on Feb. 14. It is to say that we should finally just ignore the NRA, and focus instead on the companies that make and sell guns. Indeed, the aftermath of the Parkland murders is proving that corporations are susceptible to pressure in a way the NRA isn’t.

Barie Carmichael, a senior counselor at APCO Worldwide, has co-written a new book, “Reset: Business and Society in the New Social Landscape,” which echoes the theme Blackrock’s Laurence Fink made in his recent, much-discussed letter to chief executives and directors in January: “Society increasingly is turning to the private sector and asking that companies respond to broader society changes.”

Employees want to work for companies whose values align with their own, and customers wants to buy from them. And nothing shows this better than the corporate reaction to the Parkland shooting.

Even without much overt pressure, dozens of companies have ended discount deals with the NRA. After Georgia’s pro-gun legislature retaliated against Delta Air Lines Inc. for doing so, stripping a proposed $50 million tax break out of a bill, the company’s chief executive, Edward Bastian, didn’t flinch. “Our decision was not made for economic gain and our values are not for sale,” he said.

Meanwhile, Dick’s Sporting Goods Inc., a company where guns are a core product, decided it could no longer in good conscience carry the kind of semi-automatic rifle that was used in the Parkland shooting.

Walmart Inc. stopped carrying AR-15s three years ago. Dick’s, Walmart and L.L. Bean have all said they will no longer sell guns to anyone under 21. And Recreational Equipment Inc. (REI), which does not carry guns, broke off its relationship with Vista Outdoor Inc., a maker of popular outdoor gear, because it also owns a gun company.

What more can be done? Plenty. One potentially fruitful tactic would be to target the stocks of the publicly traded gun companies, which include American Outdoor Brands Corp. (formerly Smith & Wesson), Sturm, Ruger & Co., and Vista Outdoor.

Usually after a mass shooting, gun company stocks go up, because the threat of gun control legislation causes gun enthusiasts to rush out and buy new guns. This time, however, that hasn’t happened.

American Outdoor Brands is down 53 percent since Trump became president, and has lost 10 percent of its value just since the Parkland mass shooting. Sturm, Ruger is down 5 percent since the Florida shooting. The moves by Dick’s Sporting Goods, L.L. Bean, Delta et al. have clearly had an effect.

One big national retailer that still sells AR-15s is Bass Pro Shops, which in 2007 joined forces with Goldman Sachs’s private equity fund to buy the gun retailer Cabela. Ever since the 2008 financial crisis, Goldman has been extremely sensitive about its reputation, which offers opportunity for investors. At a minimum they should push Goldman to insist that Bass Pro Shops follow the lead of other retailers in setting 21 as the minimum age for a gun purchase.

Another step is to pressure investors to divest from gun company stocks. University endowments are often vulnerable to such pressure; a public campaign by students to get endowments out of gun stocks could well succeed.

TIAA, an investment firm that loves to boast about its values — “We never compromise our high ethical standards,” it states on its website — owns gun stocks, according to data compiled by Bloomberg. The New York State Teachers Retirement System owns gun stocks. Surely, New York’s teachers’ union could force its pension fund to divest itself of gun stocks.

I also noticed that Invesco’s Small Cap Value Fund owns nearly 9 percent of American Outdoor Brand — a purchase it disclosed on Feb. 14, the same day as the Parkland massacre. (An Invesco spokeswoman declined to comment.) Invesco has a big 401(k) business, and plenty of individual investors — as well as shareholders who own its stock. There are lots of pressure points that could be applied to the company and its Small Cap Value Fund, which had $2.6 billion under management at the end of 2017. An organized campaign to pull assets out of the fund could send a serious message to the firm.

Then there’s BlackRock, which turns out to be the biggest shareholder in several gun stocks. If you ask BlackRock why it hasn’t shed those stocks, given its messaging about improving society, the answer you get is that it is part of the company’s small cap index fund. It can’t unilaterally remove a stock from an index.

Actually it can, which is why BlackRock is exploring creating index funds that exclude gun companies and retailers (while also continuing to offer funds that include gun stocks). More significantly, BlackRock on Friday announced that it had begun challenging the gun companies it owns, demanding answers to such questions as, “What strategies do you employ to prevent the potential misuse of firearms that you sell?” Implicit in its announcement is the threat that BlackRock would be willing to join a proxy fight if an activist decided to take them on.

The nation’s biggest gun company, Remington Outdoor Co., is not publicly traded; it is owned by Cerberus Capital Management, the private equity firm run by the secretive investor Stephen Feinberg. But it won’t be much longer; later this week, the company is expected to file for bankruptcy, and Feinberg will hand over ownership to its biggest creditors, including Franklin Resources Inc., the mutual fund company, and J.P. Morgan Asset Management. And therein lies opportunity.

Acccording to Bloomberg News, the new owners hope to unload Remington Outdoor as quickly as possible, hardly a surprise given the current atmosphere. But their high profile will make it impossible to complete this transaction quietly. J.P. Morgan Chase & Co. investors — and gun control advocates in general — ought to make much of the fact that Jamie Dimon’s bank owns the company whose gun was used to murder those children in Newtown. And if Franklin Resources and J.P. Morgan wind up stuck with Remington Outdoor because buyers are scarce, advocates may well be able to force changes on the company.

Here’s another idea. Gun control advocates should own a few shares in gun companies — enough to be able to put forth resolutions at proxy time. Oil companies are being pressured by shareholders to include in their annual reports an analysis of climate change on their businesses. Perhaps gun company shareholders could pressure companies to estimate, say, how many people are killed each year with their guns. Or whether they are moving ahead with smart gun technology, which, as I pointed out recently, could save thousands of lives each year while giving the industry a sales boost.

Not everyone agrees that divesting gun stocks will work. My colleague Stephen Gandel, writing recently in Bloomberg Businessweek, noted that divestment strategies usually fail, and pointed in particular to past efforts to use the stock market to pressure tobacco companies.

But there are big differences between tobacco and guns. The Altria Group Inc., which markets Marlboro, is an enormous company, with annual revenue around $22 billion and a market cap close to $120 billion. The publicly traded gun companies are tiny by comparison. American Outdoor Brands, for instance, has a current market cap of less than $550 million, and its 2017 revenue barely topped $900 million. A wealthy gun control advocate who wanted to force smart guns on the industry could simply buy the company!

With revenue falling and a stock under $10, American Outdoor Brands is already financially constrained; investors are in a far better position to impose financial pressure than they ever were with tobacco. In the end, though, even big, bad tobacco turned out to be vulnerable — if not to financial pressure, then to societal pressure. Why else would Philip Morris International Inc. have spent some $3 billion developing and promoting modified risk products that offer the possibility of turning customers away from cigarettes?

One of the things the NRA has done successfully is use its inflammatory rhetoric to keep the heat on itself and away from the gun companies. Investors can’t do anything about the NRA, but so what? There is plenty they can do to put pressure on gun companies — so long as they don’t let the NRA distract them.

For years, gun control advocates have tried to make the country safer primarily by trying to get laws passed. Sometimes they’ve had success, but more often they haven’t, which is why mass shootings remain such a common scourge.

The time has come to try something new: to try to force change by pressuring the companies that make the guns that mass shooters use. It might just work.

■ Nocera is a Bloomberg View columnist. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. He is the co-author of “Indentured: The Inside Story of the Rebellion Against the NCAA.”Speech

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