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Since the tragic shooting in Newtown, there have been calls to reform America’s gun industry. The question is how.One of the most effective ways to do it, said former New York governor Eliot Spitzer (for one), is by messing with the industry’s money.
And that’s what happened.
Private equity firm Cerberus Capital announced that it would be divesting itself from its gun holding company, the Freedom Group, after coming under pressure from one of its investors, the California State Teachers’ Retirement System (CalSTRS).
There is a model for doing this on a larger scale, Spitzer pointed out on New York City’s WNYC this morning, and one that was pretty successful at that.
In the late 1970s, American college students started a movement to get the country’s money out of South Africa in protest of Apartheid. Their protests lead to schools like Columbia, Stanford and Michigan State divesting from the country and companies associated with it (Michigan State divested itself from Citicorp, IBM, Pepsi and more).
The University of California made the biggest divestment of all, withdrawing $3 billion from South Africa. Nelson Mandela and Desmond Tutu have pointed to that, and the University movement in general, as a catalyst for ending the Apartheid regime.
That’s especially because the movement snowballed, and prompted companies to divest from the country as well (from the NYT in 1987):
The Investor Responsibility Research centre, a nonprofit group that tracks American investment in South Africa, said 96 American companies ended direct links with South Africa between January 1986 and last month…
The centre’s report said 50 companies severed direct ties in 1986 and 46 had done so between January and September of this year. The slight quickening of pace was linked to the passage by Congress late last year of sanctions against South Africa, Mr. Hauck said.
Bottom line, Americans have a model for this. So what investment firms would Americans target in this case? Andrew Ross Sorkin broke it down in his Dealbook column this morning:
Besides Cerberus, Colt defence, a spinoff from the manufacturer of the .44-40 Colt revolver made famous by John Wayne, is jointly owned by Sciens Capital Management, a fund advised by the Blackstone Group and another fund run by Credit Suisse…
And then there is MidOcean Partners, a private equity firm that once owned the diet company Jenny Craig that now controls Bushnell Outdoor Products.
Business Insider’s Julia LaRoche dug into hedge funds that have big investments in gun companies as well.
CalSTRS has already shown us that big institutional investors (like pension funds and Universities) have the power to change the way investment firms work regarding this issue.
We’ll see if this idea picks up steam.