May 27, 2022 - Economy

BlackRock's gun money

 Illustration of a gun target with bullet holes forming a dollar sign.

Illustration: Shoshana Gordon/Axios

The largest shareholder in America's largest gunmakers isn't a reclusive billionaire or a 2A rabble-rouser with a heavy Reddit presence. It's BlackRock, the investment giant that talks Wall Street's loudest game on social duty.

Why it matters: With great power comes little accountability.

Cap table: BlackRock holds a 16.18% stake in Sturm Ruger (NYSE: RGR), a 15.26% position in Vista Outdoor (NYSE: VSTO) and an 8.3% stake in Smith & Wesson (Nasdaq: SWBI).

  • BlackRock says that none of those shares, valued at a combined $597 million at Thursday's market close, are held in actively managed funds.
  • Instead, they're in passive funds tied to third-party indexes (i.e., BlackRock doesn't choose which stocks to include). BlackRock also offers custom products for clients who don't want exposure to firearms; products created after the 2018 high school massacre in Parkland, Florida.
Price of select gun company stocks
Data: Yahoo Finance; Chart: Thomas Oide/Axios

What they've said: BlackRock regularly stresses the value of ESG and conscious capitalism, including specific comments about how gun manufacturers should do more to prevent their products from being misused. After Parkland, the firm said:

"The recent tragedy in Florida has driven home for BlackRock the terrible toll from gun violence in America. We believe that this event requires response and action from a wide range of entities across both the public and private sectors."

What they've done: Very little. The company did manage to eventually get some gunmaker engagement, but there's no evidence that any of the companies made policy or product changes to reduce gun violence. Nor does BlackRock claim that they did. Instead, the firm just seems content to have had the conversation and then let business continue as usual:

  • In 2020, for example, BlackRock voted to re-elect all seven of Smith & Wesson's directors. In 2021 it voted against one director, vice chairman and ESG board committee chair Michael Golden, saying: "The Company does not meet our expectations for disclosure of material social policies and/or risks."
  • But it supported all of the other Smith & Wesson directors, as if Golden alone was the stumbling block. Opposing the full slate would have been a much stronger statement of disapproval, even if it wouldn't have led to a different outcome (Golden still sailed through). BlackRock also opposed a resolution, brought by Catholic nuns, for Smith & Wesson to adopt a comprehensive human rights policy. It failed after receiving 44% shareholder support, which means BlackRock's vote would have put it over the top.
  • BlackRock voted against two Sturm Ruger directors in 2020 and 2021, but because of "board diversity" issues, rather than for business practices or policy. It also backed all Vista Outdoor directors in each of the past three years.
  • To be clear, BlackRock doesn't hold any shares in Daniel Defense, the privately held Georgia company that made the weapons used this week to murder 19 Texas schoolchildren and two of their teachers.

The bottom line: This isn't about my feelings about firearms manufacturers. Or yours. It's about BlackRock's, and how its actions don't match its rhetoric. And that matters because, as these companies' largest outside shareholder, it could have far more influence than you or I.

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