search
top

The Cascade of Companies Boycotting NY Continues

This is indeed looking an awful lot like the Eastern Outdoor Sports Show. Of course, the big thing that tipped that over the edge was when the big guys started pulling out. What will the large, publicly traded gun companies do? Jim Shepherd takes a look at the issue:

If, for instance, you’re an officer in a public company, there’s a different set of rules that apply. Officers in publicly held companies have something that privately-held company managers don’t: a fiduciary responsibility to shareholders.

Simply stated, the job of officers in a publicly held company is to maximize value (profit and share price) for the company’s investors. Setting corporate values isn’t something that can be done purely as a matter of conscience. Cutting off a source of revenues-without a clearly stated company policy stating that course of action is asking for disgruntled shareholders to take legal action against you for damaging the company’s revenue streams.

Without betraying any confidences, those what-if conversations are being held at virtually every company in the industry. Frankly, some companies are at a loss as to a reasonable course of action. Others are irritated that there doesn’t seem to be a clear-cut course of action for anyone.

More on Jim’s article later, but this is a bigger issue than boycotting ESOS.

31 Responses to “The Cascade of Companies Boycotting NY Continues”

  1. AndyN says:

    Does ArmaLite count as big? I don’t think they’re publicly traded, so they don’t have shareholders to worry about. As I understand it, their recent announcement regarding the new law in NY means they’re perfectly comfortable with one class of citizens being allowed to exercise their rights.

    It will be interesting to see if they take a significant hit in sales outside of NY because of this. The fiduciary responsibility to shareholders cuts both ways – if the officers in a publicly held company can point at ArmaLite and make an argument that continuing to sell in a restricted market like NY will result in negative public relations that hurt sales in other markets, they might be able to make the case that the right thing to do is also the profitable thing to do.

  2. Ian Argent says:

    The first part of that article is worth highlighting as well. I already live under a regime where simply touching a firearm not owned by me off the range is an illegal transfer.

  3. Thanks for the link. I’ve posted the phone numbers to Glock, SIG, and S&W and I’m encouraging gun owners to call them and ask them to boycott New York and other gun ban states.

    The question is, how will these three companies react to hundreds (thousands?) of phone calls?

    I’ve posted a Strategy page as well.
    http://www.ncgunblog.com/2013/02/25/so-whats-the-new-york-boycott-strategy/

  4. RAH says:

    The big tipping point was when the non gun companies and businesses pulled out of ESOS. I was especially impressed when the boats pulled out.

    The only similar is the ground monitoring sensor company joining the ban. I think S &W is very wary they have a history of the damage losing the gun buyers confidence . I think Remington has to be looking about its corporate future in NY.

    Barretta is talking about maybe moving out of MD They found out the civilian market for their rifles is larger than the government contracts. They had just expanded their facilities for what will be a banned rifle once MD new gun control laws go in effect. O’Malley is talking with Bareta. Hickenlooper is talking with Magpul.
    I have know idea whether Remington is talking with Coumo, but I would expect so.

  5. Patrick H says:

    The fiduciary responsibility does cut both ways. I agree this feels like ESOS. The shareholders can look at that and say that it’s irresponsible to continue to sell because of the lost profits otherwise. The LEO/Govt market is MUCH smaller at the state and local level than the civilian market.

    Also, remember than the policy being advocating is not stopping sales completely. But ONLY stopping those sales that are illegal for civilians to own. Glock can still sell their guns- just not their 17 round magazines.

    • HSR47 says:

      “The shareholders can look at that and say that it’s irresponsible to continue to sell because of the lost profits otherwise. The LEO/Govt market is MUCH smaller at the state and local level than the civilian market.”

      This.

      From where I sit, the arguments in favor of closing the police loophole are many, and the arguments against appear to be non-existent.

      First, as has been noted again and again, gun owners are very good at knifing traitors in the back. It took Ruger and S&W quite awhile (in addition to major management changes) to recover from their support for the 1994 AWB. NOT moving to close the police loophole will likely result in the same sort of reaction from the gun-buying public.

      Second, the demand for guns is almost totally coming from individual private citizens, and not from the government.

      Basically, the gun-buying public has made it clear that we want the police loophole closed, and we have a long history of voting with our wallets.

      Third, is the possibility that states WITH these unconstitutionally restrictive laws may eventually be forced to reconsider their statutes once it becomes clear that there aren’t a lot of manufacturers willing to support them.

  6. Patrick says:

    Also note, companies like Glock probably have contracts or blanket orders in place from NY. There may be severe penalties for either party withdrawing unilaterally. Glock does not want to deal with a lawsuit that will no doubt be backed up by the feds.

    Glock, Sig and S&W also need to act in unison, else their boycott would merely be symbolic.

    Besides, most of the companies on the boycott list so far probably only do a marginal, spot-buy type business with New York (a sale here, a few dozen this there, etc). So New York won’t notice if they can’t buy product A from distributor X, if they can buy product A1, or A2 from Y or Z.

    This is especially true with rifles as our gracious military is always sending evil black rifles to police departments. Doesn’t matter if they can’t get Spikes if they instead can get Uncle Sam.

    Not saying we should give up the fight, just to know our odds and opposition.

  7. Dave says:

    If you look at the solicitation for the 7000 DHS machine guns the per unit cost comes out to $1400. So if Barrett for example were to win, they could get a max of 1400 per unit, but in all practicality they cannot because a maximum dollar bid is not likely to win. Therefore it’s entirely likely the final per unit cost will be somewhere between $1000.00 – $1300.00 per unit. This is for a 5.56×45 mm carbine, full auto which is slightly less expensive than semi-auto only.

    The current commercial market would get far more $$$ per unit than the expected payout of the DHS contract so what business in their right mind would take
    1) less money from the government
    2) Bad press for arming the upper caste with stuff the lower caste can’t have
    3) the added difficulty of passing the trials & meeting the gov. requirements

    The current political climate & economic situation means that the large manufacturers are actually better off in the commercial market than with government contracts.

    ~75% of most manufacturers profit is from the commercial market. Give or take based on several manufacturers. FN for example probably does a higher .gov percentage than most for their DOD contracts. However, the LEO market is not as lucrative as one might think. Enter the “law enforcement discount” that the commercial market subsidizes. The per unit cost on the duty Glock is lower thanks to all the rest of the Glock customers paying higher amounts to amortize that “law enforcement (contract) discount. So, if they are selling the Glock Fohtay to the DEA for $275 per unit, and it costs them $280 to make the gun, who pays the balance?

    There needs to be pressure from manufacturers to
    1) knock off the law enforcement discounts
    2) make LE buy in the commercial market like everyone else.

    This will close the police loophole, making easier for distributors, FFLs & accessory sellers and it will lower the price of stuff in the commercial market.

    These manufacturers who continue to sell restricted items to law enforcement and do it at a discounted rate are subsiding those sales via the commercial markets. We should not be paying for anti-gun police chiefs to arm their forces with firearms and accessories not legal for us to own.

  8. RAH says:

    Glock and Sig are non US companies and so I do not expect them to join the ban.

    Colt, Remington and S &W are the US companies that are at risk.

    Colt and Remington are having their states shut down their market so they may move and that is a bigger decision than just a ban.

  9. BC says:

    Here’s how you convince these companies: you vote with your dollars. Shareholders skittish about their equity losing value if the company cuts off LEO sales will be reassured if each “lost” sale to an LEO is offset by two or more “gained” sales to private citizens supporting the company for doing the right thing.

    It’s fine to say, “I’m a customer and I vote,” when you write these guys. It’s even better to say, “I’m a customer who’s bought your products in the past, and I’m enthusiastic about giving more of my business to manufacturers who show solidarity with me on Second Amendment issues.”

  10. ern says:

    There’s really only one choice for them–do *something* to show solidarity against new gun restrictions, or lose the civilian market. What they can’t do is nothing. I wouldn’t want to be Colt, Remington, or Smith & Wesson right now. They’ve got to think creatively. If they can’t outright pull out of anti-gun states, they’re going to have to find some other way to realign themselves. No easy task.

    • They don’t need to “outright pull out of anti-gun states.” All we are asking is that they don’t sell to police anything that they can’t sell to the residents of that state.

      If Glock, SIG, and S&W were on the ball they would have recognized the fact that the NY SAFE act doesn’t include a Police Loophole. It’s illegal to transfer an “assault weapon” or a “high capacity” magazine to anyone, cop or not. A contract to commit an unlawful act is itself void. All they have to do is say “the NY SAFE Act invalidates our contracts. We are willing to enter into negotiation to start supplying revolvers and Joe Biden approved shotguns to the NYPD.”

      • Bryan S. says:

        My understanding is that it applies to off duty cops, not departments.

        Just like the Hughes Amendment and the 94 EBR Ban

  11. mike123 says:

    The big boys can’t come out and say they are not selling to NY anymore. Its a violation of Anti-Trust laws.

    They also will need to honor their contracts which likely have a term of several years, so they can’t just jump up and walk away.

    I don’t think the big boys can join the boycott because of the anti-trust implications of such an act.

    • Mike123: Did you not read the comment directly above yours?

      • mike123 says:

        Sorry, no. I wrote this and then had dinner and then hit submit

        You are correct, they would have to comply with all laws which means no standard cap mags for the armed enforcers of gun control. The reality is that the contract isn’t void but it does end up in a holding pattern till the parties sort out the options.

        I negotiate sales contracts and had this happen a couple of times. Usually Legal jumps in and every decision goes through them. The resolution is quietly handled with as little publicity as possible. That’s why I don’t expect a boycott announcement, just quiet policy changes.

        I’ve been on deals where the Government gave us permission to violate the law while we “adjust” to the new regulations. I’ll bet the NY AG is working on ‘consent decree’ right now to allow gun sales in the short term.

        Ruger is holding a conference call on Thursday, February 28, 2013, at 9:00 am EST. This is a material event, so they will have to provide info about their compliance.

    • Sebastian says:

      I’m not sure an anti-trust action against a company engaging in a boycott would be a slam dunk. Anti-trust law doesn’t allow for collusion in order to engage in anti-competitive practices. I would think you could have a decent first amendment claim to companies refusing to sell to certain customers as a political statement, provided it wasn’t discriminatory against a protected class.

      • mike123 says:

        They could try the 1st Amendment claim but a boycott functions alot like collusion among competitors to divide the markets.

      • While an anti-trust action might not be a slam dunk, I do think a lawsuit alleging breach of fiduciary duty might well succeed against publicly traded companies like Ruger and S&W. I would add Remington/Freedom Group and Savage Arms to this list as they have outside investors.

        The directors and officers of these companies have a duty to act in the best interests of their shareholders and investors. Note that is the BEST interests. Given that the majority shareholders and investors are what are considered institutional investors, their interests are profit maximization and not politics. You would have to have a compelling case for your decision to turn down business from a governmental entity or their employees. I think you would have to be able to prove in court that the fear of consumer boycotts of your products is a greater risk than not selling to New York. I don’t think that would be easy to do.

        Please understand where I’m coming from – it isn’t that I wouldn’t want the majors to join a boycott but I don’t think we can realistically expect them to take the legal risk.

        • Dave says:

          But the money is just not with government contracts now, or for the past 4 years. The commercial market is hand over fist more profitable.

          It used to be that .gov contracts were “sure money” meaning you won the contract, and you had a certain number of units sold, and could count on that money as “in the bank”. This however is not the 90’s and that doesn’t hold as much weight.

          Back in the 90’s, major gun makers were selling 75% of their firearms on the commercial market, on average. The profit margin on LEO sales is smaller than in the commercial market as it has been since they started the practice of LEO discounts. So, now if they sell an Acme blaster for $400, where it sells on the commercial market for $575 and they sell 1500 units to the Podunk, Nebraska PD, but they sell 3000 among 3 distributors at $575, how does that best represent the fiduciary interests of the shareholders?

          It does’t and it hasn’t for a long time. There is a ‘prestige’ with being able to market the Acme blaster to the Podunk PD, sure but now there is a growing momentum with the commercial market consumers who will only buy from those in the industry who stand with us.

        • HSR47 says:

          Actually, all they’d really have to do is point to what happened with S&W after their deal with the Clinton administration.

          We’re very good at knifing traitors in the back, and there are plenty of other gun manufacturers. Failure to work towards closing the police loophole would certainly bee seen by the public as being substantially similar to S&W’s collusion with the Clintons in the 1990’s. The public reaction would surely be the same, and that would hurt more than the lost sales to government agencies in leftist states.

  12. RAH says:

    I fail to see how a boycott of customers amounts to restraint of trade or violation of anti trust. Now if the companies break contracts they can be sued for that.

  13. Publicola says:

    I don’t think consumer pressure will work on the bigger makers. Not because they wouldn’t care – but because it wouldn’t be possible. People are offering first born children for AR’s nowadays, so getting them on board a boycott when they’ve got distributors on speed dial waiting for their MSRP squared M4gery to come into existence is kinda like asking a recently single guitar player to not go home with the stripper who thinks he’s cute. I mean you can ask, but…

    How frikkin ever, I do indubitably believe that most of the larger firearms concerns shop out certain parts. Magazines, for example, aren’t typically created in house. So it could be effective if we convinced, say MagPul, Mec-gar & ProMag to stop supplying their wares to makers who deal with the devils. I think MagPul might be down, but Mec-Gar is Italian so no idea if they’d be game. ProMag is simply an unknown to me.

    That’d be cute wouldn’t it? I mean to see a mag marked “Not For LEO/Governmental Use”. ;)

    How to talk the mag makers into it though? Same problem as with pressuring the gun makers directly – everyone is still panic buying, & re-supply of mags on most vendors shelves is an event measured in minutes.

    Oh, lest my pragmatic streak be taken absolutely, I should toss in that I’d like to see a “we won’t sell to” list that includes ALL .gov’s where folks can’t buy & carry what the cops can. That’d add NJ, Illinois, Cali, Mass DC, Denver & a bunch of other places, including the feds. Wishful thinking perhaps, but I do hate to see companies selling rope that someone else may use to hang us with.

    But going the mag suppliers route would be the best way to add pressure tot he gun makers. It’s just a question of how to convince the mag makers to get religion

  14. Motor-T says:

    From the consumer side, I have decided not to boycott those companies that don’t participate in the LEO sales blockade. I have decided to not buy from those companies if the same (or substantially similar) product is available from a manufacturer participating in the blockade. But if they’re the only company making the item, I’ll buy it from them.

  15. Rorschach says:

    While publicly traded companies are sensitive to the legalities of fiduciary duty of their officers, they are also sensitive to stock prices. All of the companies have had large increases in stock prices as a result of increased sales. if those stock prices were to plummet as a result of their non-participation in the boycott you will see them climbing onboard so fast it would make your head spin.

  16. RAH says:

    Now they are 95 on the list. Mostly small companies but momentum is on our side

top