Sturm, Ruger & Company (NYSE: RGR) held its Annual Meeting of Shareholders yesterday. Like most annual meetings, this one was not a free-flowing, give-and-go between the company’s officers and shareholders. Those only happen in the movies.
In real life, annual meetings are almost as interesting as the orientation lectures for incoming freshman. Sure, the information in both is helpful, but there aren’t many professors or CEOs who deliver lines like Robin Williams or Donald Sutherland. And the business of running a for-profit company isn’t suppose to be exciting, it’s supposed to be profitable.
Even for executives who enjoy engaging, there’s very little wiggle room for ad-libbing. After all, the Securities and Exchange Commission is paying close attention to make certain everything’s run as mandated.
Ruger’s meeting lasted less than an hour. Yet, it contained plenty of meat-and-potatoes about the company -all available in the annual and quarterly reports (available in the back of the room). The short exchanges between activist investors and Ruger CEO Chris Killoy were the only off-script portions of the meeting.
They came in the question-and-answer period which always follows the completion of the agenda items. The business of the business always comes first in all Annual Meetings.
In the Q&A session, the representative for the Adrian Dominican Sisters (the Congregation of the Most Holy Rosary, an Adrian, Michigan Catholic religious order of 603 sisters that serves in “ministries education, health care, pastoral and retreat ministry, the arts, social work, ecology and peace and justice advocacy”) began by thanking Killoy for the report the company issued last year. As she continued, however, she expressed continued “concerns that the company still does not recognize the reputational and financial risks associated with gun violence in our society.”
“We understand your believe that you have fears of alienating your base,” she continued, listing a long inventory of actions taken “just this year” to help prevent the “epidemic” of gun violence, “so we believe the tide is tuning and your position is short-sighted. We believe this groundswell can’t help but ultimately reach the company.”
“We see,” she concluded, “a future where acceptable solutions to prevent gun violence can peacefully coexist with the Second Amendment.”
Her lengthy preamble to a non-question is the reason why “questions” are limited to two minutes (or less) in Annual Meetings. They’re not rapid-fire, reporter-like questions to specific issues, they’re the opportunity for activists or dissidents to make their concerns known in a very public setting.
Questions can be serious or silly. Accusatory or laudatory. Most, as was the case yesterday, are delivered civilly, but deliver a veiled promise: continued activism, unless their desires are met.
Seeing “acceptable solutions” used in conjunction with the “Second Amendment” inside the “questions” is commonly referred to as “signaling your position”. The Sisters and their ally shareholders, want Ruger to be the first company to “do something”.
Unfortunately, Ruger CEO Chris Killoy’s response on their considering “gun violence” a risk the company should address wasn’t the answer they were hoping for.
“Risk is something we take seriously,” he responded, “we do assess risk- including risk to our corporate reputation.”
“But, remember,” he said, “we’re a firearms manufacturer. We are making what we consider to be great firearms for our customers…and.we go to great lengths to sell them in a legal and responsible manner at all levels.”
“We think the way that we conduct ourselves is very professional, very ethical and there’s nothing we’re ashamed of in how we do business. But again, we’re in the gun business.”
He then offered a first-person example of what constitutes an unacceptable corporate risk for any gun company.
“I was at Smith & Wesson as the Vice President of Sales & Marketing when Smith & Wesson signed an agreement (the now-infamous “voluntary gun control” agreement with the Clinton administration), Killoy explained, “Out of nowhere, “it wasn’t the NRA who boycotted Smith & Wesson, it was our customers.”
“Almost overnight we lost nearly fifty percent of our core business,” he said, “our customers nearly put us out of business.”
It’s not unrealistic to believe that would still be the likely outcome today, despite the “groundswell” cited by the Sister’s position/question. When Dick’s Sporting Goods decided to stop selling certain types of guns and to raise the age limit on purchases to 21 years or older, the sales backlash was measurable. And it continues today, despite the company’s insistence to the contrary.
And the “smart gun” technology the activists advocate?
Not something the company’s ignoring, Killoy said. But he stressed two things Ruger believes to be true today: the technology isn’t there, and, more importantly, customers aren’t asking for it.
“We think we have a pretty good idea what our customers want,” he said, “we aren’t seeing any market for ‘smart guns.’”
“I don’t get any customers asking for a quote-unquote ‘smart gun,’ he said, referencing the online “Ask the CEO” website that he says receives “hundreds” of emails every week.
“It’s not a question of our saying we’re not going to look at that,” he said, “It’s a question that we genuinely don’t think there’s a market for that -in addition to the technologies not being ready.”
Only minutes after, the annual meeting adjourned.
But that’s probably not the end of the story.
Because activist investors are by definition, activists.
And despite having been welcomed rather than being treated as dissidents by Ruger, they’re not about to stop their efforts to get someone in the gun industry to join them in their efforts to do something about “gun violence”.
Anything, it seems, except address root causes of violence of all kinds.
Being seen as impinging on the Second Amendment - no matter how noble the intent- isn’t a risk that requires much assessment by a gun company.
That’s a juice definitely not worth the squeeze.
—Jim Shepherd
Editor’s Note: Earlier this week, Jim Shepherd’s column on the struggles of small gun shops apparently struck a nerve. Tomorrow, National Shooting Sport Foundation President Joe Bartozzi offers his insights on how small gun shops can survive…and thrive.