The Sandy Hook Elementary School shooting has stimulated the debate about guns in this country in a way that previous shootings have not. Even President Obama, who’s been timid about gun control in his presidency, looks to be moving toward real governmental action.
For those who want legislation–to ban assault weapons, large clips, to close the gun show loophole–keeping continued pressure on Congress and the president may succeed. But, as Eliot Spitzer pointed out in a recent article for Slate, movement on these issues doesn’t necessarily have to come from Capitol Hill. The public’s power as investors and shareholders can be just as effective.
“Ownership can be more powerful than regulation,” Spitzer wrote. “The capacity of pension funds and endowments to act collectively and use their rightful interest in having their funds invested in a way that reflects their core values is something we have largely forgotten.”
We saw an example of ownership power in action Tuesday, when the private equity firm Cerberus Capital Management announced that it would sell Bushmaster, the company that made the assault-style rifle used in the Newtown massacre.
“It is apparent that the Sandy Hook tragedy was a watershed event that has raised the national debate on gun control to an unprecedented level,” Cerberus said in a statement released Tuesday. “Accordingly, we have determined to immediately engage in a formal process to sell our investment in Freedom Group.”
In a comprehensive piece on Cerberus and Freedom Group in The New York Times last year, Natasha Singer explained the issue.
“In recent years,” she wrote last November, “many top-selling [gun] brands—including the 195-year-old Remington Arms, as well as Bushmaster Firearms and DPMS, leading makers of military-style semiautomatics—have quietly passed into the hands of a single private company. It is called the Freedom Group—and it is the most powerful and mysterious force in the American commercial gun industry today.”
Essentially, Freedom Group is a holding company made up of firearm giants like Bushmaster, Remington, Marlin Firearms, Dakota Arms, and DPMS Firearms, among others. They, in turn, are (were) owned by Cerberus Capital Management.
The fact that Cerberus is selling its investment doesn’t mean that Freedom Group will be dismantled. As Rick Newman at U.S News and World Report wrote, “gun sales tend to rise after mass shootings, for two reasons: The violence frightens some people, who buy weapons to defend themselves, and gun owners worry that new laws limiting sales could go into effect, so they stock up.” But the sale might not be so easy. A key reason why Cerberus pulled out of Freedom Group was that one of its largest investors, the California State Teachers’ Retirement System (CalSTRS), began reconsidering Monday all of its gun-related investments, namely, its investment in Cerberus. This is the kind of power individuals have through their investments and stock ownership. A teachers’ pension fund like CalSTRS, which manages $155 billion worth of investments, ultimately answers to the teachers who make it up. If the teachers are outraged by the proliferation of assault weapons, they can act collectively to remove their investment from companies that make them. Just the threat of it and Cerberus dropped its gun investments, a move which will no doubt shake up the industry–before any bill hits the House floor. The problem is that many teachers–as well as police officers, firefighters, and other investors–aren’t aware that they’ve indirectly invested in the firearm which facilitated such a horrible tragedy. “Every student at a university should ask the university if it is invested in Cerberus,” said Spitzer. “Every member of a union should ask their pension-fund managers if they are invested. Information is the key first step. From there, action will quickly follow.”
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