In October 2018, the IPCC published its latest report detailing in no uncertain terms that global carbon emissions need to drop by half by 2030—and reach net-zero by 2050— to have just a 50% chance of limiting warming to 1.5˚C and avoiding the worst effects of climate change. Warming beyond 2°C — the path we are currently on — will likely result in catastrophic harm, as global conflicts and mass migration produce unprecedented levels of social, political, and economic disruption.
Far too many American fossil fuel-intensive companies have failed to take meaningful climate action. Not only have they failed to reduce or eliminate overall carbon emissions, they have spent billions on lobbying and political expenditures which directly undermine climate goals. Their boards of directors, which are elected by shareholders to serve their long-term interests, must be held responsible.
The largest investors in these companies are often the largest investment managers in the world, firms like BlackRock and Vanguard that manage retirement and savings plans for millions of Americans. Their large ownership stakes give these fund managers outsized influence over the boards of directors of these companies, and they could be using this power to demand immediate and effective action and accountability. However, these asset managers have far too often failed to use their power to hold these companies accountable, all too often using their swing vote to doom critical shareholder resolutions. BlackRock, the largest of these, supported 99% of management-nominated directors at US fossil fuel companies while voting for just 10% of key climate shareholder resolutions in 2018.
Gun manufacturers could be doing so much more to contribute to gun safety: investing in safer gun technology, monitoring their distribution chain, and telling gun lobby groups they fund to support universal background checks and federal funding for gun safety research. But, they don’t—and there’s a reason. There was a moment in 2000 when Smith & Wesson attempted to take steps to transform itself into a more responsible company—in response, the NRA ran a campaign that nearly bankrupted them. So we have a situation where gun manufacturers use shareholders’ money to fund the very organization, the NRA, that not only undermines gun safety, not only promotes racism and cultural warfare, but would seek to destroy the gun manufacturers if they ever tried to be more socially responsible.
All of this creates perverse incentives for gun manufacturers, which undermines long-term prospects for investors. Gun manufacturer profits are deeply tied to short-term cycles of what’s known as “fear-based sales”—customers buying guns in fear that those same products will be further regulated in the future. Furthermore, the manufacturers refuse to invest in gun safety technology, even though a recent survey showed that 59 percent of Americans and 43 percent of gun owners say they would want those products. In no other industry are companies literally unwilling to pursue a potential market through safety innovation because their own advocacy organization would try to destroy them. All of this squanders potential shareholder value for the long term.
Gun manufacturer need boards of directors that can provide the leadership, independence, and long-term orientation needed to successfully navigate these complex issues. Unfortunately, Majority Action’s due diligence on gun manufacturer directors has revealed many substantial gaps in disclosures, independence, and judgement. The largest investment managers in the world, firms like BlackRock and Vanguard, have outsized ownership at gun manufacturers like Sturm Ruger and Smith and Wesson, giving them outsized votes on who should serve on their boards of directors. These fund managers have particular responsibility to use their influence to hold gun manufacturer boards accountable.