Advocacy or Divestment? Time for the Financial Industry to Step Up
Image credit: Daily Kos
In the days since the most recent Florida school massacre, we have seen an incredible level of activism for school safety lead by Florida high school students. From marching on Washington to push for sensible gun laws, to calling for boycotts of companies that support the National Rifle Association (NRA), these young people are leading the way. The resulting backlash toward the NRA has been huge, including Dallas Mayor Mike Rawlings saying “No” to hosting their Spring conference. Company after company (from United and Delta Airlines to Avis and Hertz Car Rentals) have stated they will end their discount programs and sponsoring relationships with the over five million member gun promoting organization.
With consumer pressure, the #BoycottNRA movement is gaining momentum. And yet to make significant progress toward reducing gun violence in America, a multi-pronged approach is required.
Nation wide, support for stricter gun regulation is at an all time high, and many of our large corporations are both listening and responding. Chubb Insurance Company has discontinued the NRA Carry Guard insurance program. The National Bank of Omaha stepped up in announcing that they will not renew their NRA membership credit card this year. This is a great start in calling attention to the need for change. It is now time for the financial sector to also step up. Trillium Asset Management recently made a call to the financial industry to “get off the sidelines.” I fully support this call to action and ask us to go further. It is time for the financial industry to stop hiding behind “fiduciary responsibilities” and to take a stand and actually own what we own.
Is shareholder activism the path to fewer school shootings?
An often times effective approach to creating change in corporate America is to engage in shareholder activism. Through coordinated shareholder action (methods beyond voting proxies can range from dialogue with managers to formal proposals) companies can be pressured to do the right thing. If a company is heading there anyway, shareholder activism can accelerate the process. Share holder engagement can be a powerful tool. We see it as both an investor right and a responsibility. My belief about engagement is that yes, shareholders are powerful and can nudge a company in the right direction. And, if a company is heading there anyway, shareholders can certainly speed things up.
At Nia, for example, we vote all of our proxies. We also engage with some of our companies, urging them to add more diversity to their leadership teams. We point to the research that suggests this increase in diverse voices and life experiences can in fact lead to stronger fundamentals for company balance sheets and better financial bottom lines. We choose companies whose core business model is solution-focused for a sustainable economy. We are looking to improve their governance strategies, not seeking to change their very reason for being.
However, engaging with the weapons industry is an entirely different endeavor. Talking to gun manufacturers about how to make their products safer, asking them to distance themselves from the NRA, or to help lobby for stricter background checks is akin to asking the fox to do a better job of watching the hen house. It’s just not in their DNA, or in their business plan to make these potentially revenue reducing changes.
Time to divest?
This is where divestment becomes a vital strategy. When lawmakers are not able to pass gun legislation, it becomes time for those who want see an end to automatic weapons use our voice as investors to send a strong message by removing these companies from our portfolios. Our investment money is largely what fuels the economy. By selling gun and ammunition manufacturers, gun distributors and sales processing companies from our portfolios we can collectively send a powerful message to the markets and the weapons industry.
See here for a list of armament manufacturing companies (this list does not include ammunition makers such as Olin, large distributors like Dicks Sporting Goods or WallMart or sales processing companies such as Visa or Mastercard.) A comprehensive divestment strategy would include all of the companies within the gun purchasing cycle.
The Bottom Line
It is time for all of us to connect the dots between our world views and what our investment portfolios are fueling, and to own what we own. We as company shareholders and members of pension plans can either remain part of the status quo, or we can play an important role in bringing sensible gun laws by leveraging our investment portfolios as tools for change.