Nasdaq:

Proxy service firms Institutional Shareholder Services (ISS) and Glass Lewis are calling for American Outdoor Brands (NASDAQ: AOBC) investors to follow the lead of those at Sturm, Ruger (NYSE: RGR) and force management to draft a report stating that management is monitoring acts of gun violence in the country and the risks they represent to the company.

American Outdoor Brands — the former Smith & Wesson — is hosting its annual meeting on Sept. 25, and a number of activist healthcare and religious groups have jointly submitted a shareholder question for approval. Earlier this year, a similar effort succeeded at Ruger.

The ballot question asks the company to do three things:

• Monitor violent events in which Smith & Wesson products are used.
• Prove the gunmaker is working to produce safer firearms and related products.
• Assess the risks to the gunmaker’s reputation and financial well-being from gun violence in the U.S.

In a report issued by ISS, the corporate governance outfit endorsed the proposal as a way to prove American Outdoor Brands’ board of directors is keeping the long-term risks of gun violence in mind.

Reuters reported that ISS concluded, “There is reason to believe that smart gun technology could be employed to make guns safer in the U.S. and that any engineering problems could be overcome if there was a market for the product.” So-called smart guns use technology to make sure the weapon is in the hands of its owner before it fires.

[ … ]

Sturm, Ruger CEO Chris Killoy accepted the vote by investors, saying, “shareholders have spoken,” but he also went on to point out, “What the proposal does not and cannot do is to force us to change our business, which is lawful and constitutionally protected.”

While American Outdoor Brands undoubtedly feels the same way, it’s possible it will have a very different result than Sturm, Ruger did.

First, Ruger’s meeting was held at a hotel and an activist representative appeared and made an appeal to shareholders; American Outdoor’s meeting is an online-only event. (It’s the second year the gunmaker has conducted the annual meeting this way.) And as noted above, institutional investors own a smaller proportion of American Outdoor stock, making it a little more difficult to compile enough votes in favor. The meeting is also further removed from the Parkland school shooting, while Ruger’s event was more contemporaneous with it and emotions were more raw.

As I’ve said before, if you open your stock to investors (go public) and you’re subject to the political whims of money-people, you’d better make sure your employees own a majority of the stock and can reject things like this.

I see both Ruger and Smith & Wesson as vulnerable.