NEW YORK Perhaps it is not a surprise that Cerberus quickly decided to sell the Freedom Group, its collection of gun companies, including Bushmaster, the firm that made one of the weapons used in the Newtown, Conn., massacre. Cerberus has been notoriously secretive about its finances, and the adverse press it has attracted in the aftermath of Newtown forced a hasty retreat Tuesday. This should be encouraging to those of us who wish to shift the debate about guns: A few critical articles, some whispers from major investors questioning their investment in Cerberus, and decisions were instantly made that could cost the company hundreds of millions of dollars.
Earlier this week, I wrote:
“Cerberus’ investors are indirect owners of Bushmaster. It is time to determine pension fund by pension fund who has invested in Cerberus and bring pressure on those investors either to get out of Cerberus or have Cerberus change the way it runs the gun industry. If a major union pension fund or university endowment has an investment with Cerberus, it surely doesn’t want to be tarred as a passive owner of the company that sells semi-automatic weapons with no background checks or concern for the use of the weapons. Those investors have enormous leverage over the Cerberus. And all those investors collectively, if they spoke with one voice to the management team at Cerberus, could wield vast power.”
So there is a significant message here: Ownership matters. Ownership can be more powerful than regulation. 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. It is too easy when things go fundamentally awry to call for more legislation or blame failed regulators.
We shouldn’t diminish the pressure we apply to Congress now to enact real gun control. (We also should revive an idea first raised by the late Sen. Daniel Patrick Moynihan, D-N.Y.: bullet control. There may be too many guns to rid the streets of guns, but there are not that many bullets, especially in the calibers needed for the types of weapons used in these shootings. Make the sale of bullets to anybody not licensed to carry a gun illegal, micro-stamp bullets so they can be traced. This would have a remarkable impact on both violence.)
But at the end of the day, it is those who own the shares and invest the dollars who can and must be held to account. And if those investors awoke to this responsibility and possibility, they could make enormous improvements in American life.
Imagine if investors in Wal-Mart really cared about bribery at that company’s overseas operations or safety standards at its overseas manufacturing plants. If investors pulled their capital, corporate leaders would have to respond.
Imagine if the pension funds and endowments that own much of the equity in our financial services companies demanded that those companies revisit the way mortgages were marketed to those without adequate skills to understand the products they were being sold. Management would have to change how things were done.
And imagine if the shareholders pressured large retailers to cease the sale of certain semi-automatic weapons or risk having their shares sold. You can bet that those retailers would reconsider their gun sales.
Shareholders have the right and obligation to set the parameters of corporate behavior within which management pursues profit. The speed with which Cerberus said it was getting out of the gun business shows how easy it could be to change corporate behavior, if only shareholders set their minds to it.
Eliot Spitzer, former governor of New York, hosts “Viewpoint” on Current TV.
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