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For stronger gun control laws; against the divestiture of gun stocks

By Edward Zelinsky

Even before the events in Newtown, I supported the strengthening of gun control laws. Advocates of gun rights correctly assert the need for better enforcement of existing laws as well as the urgency of confronting the violent nature of our culture. But General McChrystal is also correct. There is no compelling reason for civilians to own or possess high capacity weaponry designed for military missions.

The case against the divestiture by public pension plans of the stocks of gun manufacturers is as strong as the case for stronger gun control laws. Such divestitures have been undertaken by public pension plans in New York City, Chicago, and California. If individuals want to avoid gun stocks in their personal investments (including their own IRAs and self-directed 401(k) accounts), they have every right to do so. However, pension fiduciaries are not investing their own money. Such fiduciaries should not use the funds under their control to pursue political agendas — even political agendas with which I agree.

For public pension fiduciaries to divest gun stocks is both futile and troubling. In a competitive market, such divestiture is an economically meaningless gesture. When the New York, Chicago, and California pension plans sold gun stocks, someone else bought them. The net result was an ineffectual game of musical chairs which simply shifted the ownership of these gun stocks from one owner to another.

Moreover, there is no principled limit once political criteria are introduced into the investment of public pension funds. If pension trustees should divest the stocks of gun manufacturers to advance a political agenda, why don’t they also divest the stocks of companies that make the unhealthy foods that New York Mayor Mike Bloomberg correctly identifies as a severe public health problem? Or why do they not sell the stock of the media and software companies which make violent movies and video games?

To avoid this slippery slope, fiduciary law declares that pension funds should be invested, not to further anyone’s social agenda but to exclusively benefit the financial capacity of pension plans to fund the retirement payments they owe. The exclusive benefit rule, as it has become known, precludes the fiduciaries of pension plans from pursuing objectives which, no matter how worthy, divert pension resources from the mission of providing retirement income. Once that diversion starts, there is no convincing place for it to stop.

Many public pension plans confront serious problems including underfunding unrealistic rate of return assumptions and the ongoing retirement of the Baby Boomer workforce, that will stress such plans in unprecedented numbers. In this challenging environment, the exclusive benefit rule serves the salutary purpose of assuring that pension funds are invested with a single-minded focus on producing economic returns. Pension plans should not pursue social agendas which, however worthy, are irrelevant to pensions’ mission of providing retirement benefits.

Our elected officials should push for additional laws to control gun violence and for stronger enforcement of existing laws. The executives of media and software companies should act responsibly to reduce the violent nature of their products. But pension trustees should not divest gun stocks to further the gun control agenda.

Edward A. Zelinsky is the Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University. He is the author of The Origins of the Ownership Society: How The Defined Contribution Paradigm Changed America. His monthly column appears on the OUPblog.

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Image Credit: New York Stock Exchange. Photo by Elbie Ancona, 12 August 2010. Creative Commons License via Wikimedia Commons.

Recent Comments

  1. Matthew

    Could someone answer me this question. If there is no need for the population to have weapons designed for military use (which I could agree with in theory). Then why are millions of them pointed at the American population here at home. The police departments of the U.S. have those same weapons and they are in a civilian setting. Most police officers carry assault rifles in the trunk of there vehicles.

  2. Matthew

    Why do the police have assault weapons here at home if they are for military settings.

  3. Gunny Myrick

    Why do you advocate for strengthening gun control laws when the thousands of gun laws are not being enforced now. When I fill out the paper work to purchase a firearm,
    I am not a felon,drug user,on probation,mentally ill…(form 4473) false statement is subject to $250,000. and 10 years imprisonment. The government has my finger prints,DNA,medical files to include mental evaluation. Suppose I don’t like the fact that some people have vehicles that can go over 55 mph and could kill if not used properly! Maybe we should put governors on all vehicles so the few will be compliant and the majority will be controlled.

  4. Pension Geek

    Every type of firearm currently available for civilians was designed for use on military missions. That’s everything from muzzle loaders on up to semi-auto. The muskets owned by the population when the 2nd amendment was ratified were equal to or better than the military arms of the time.

    There is nothing that makes the 11th round in a magazine more dangerous than the first 10. Gun control is about control, not about crime. Feinstein’s stated goal is to round up all guns and take them. In the mean time, she will take what she can get. We have the lowest levels of enforcement of existing gun laws and had the US government sending guns to Mexico (Fast and Furious). Now, they finally have a tragedy they think they can exploit.

  5. Bill v

    “There is no compelling reason for civilians to own or possess high capacity weaponry designed for military missions.”

    Just to make a correction. Those weapons the general talks about are not readily available to the average Joe,and have not been used in any mass murders. Remember it is in the best interest of the left to confuse the sheep into thinking that those “scary looking weapons” are assault weapons of war. They are not that smart, so you have to clarify.

  6. Duncan Brennan

    The pension fiduciary’s prime responsibility is the financial success of the pension fund. If we take Sturm Ruger & Co. for example, if your pension had bought it at it’s 52 week low of $34.22, at Monday’s closing price of $57.54, that’s a 68% increase. What other area of the economy has seen that kind of growth and value increase?

    You’d be willing to put people’s financial future in jeopardy to make a emotional stand? Also, in attempting to make gun control as stringent as you would like it will put HUNDREDS of people out of work. The AR-15/10 and Kalashnikov platform rifles may seem evil to you because you only hear about people doing bad things with them, but to others, that’s their business. And their businesses touch others throughout the country. I can say this about fans of the AR-15, they will buy from small, American-based businesses when they can. For many, it’s a mark of pride. The businesses that build AR parts, rifles and accessories buy capital goods like milling equipment, CNC machines, they employ highly-skilled workers and strive to retain and grow those workers.
    But, you’re probably not listening to me anyway since I’m one of those people you think is a murderous gun nut. Just remember, that if the gun industry takes a hit, likely so will the rest of the economy.

  7. B Morsoit

    I think part of it relates to the undue influence the gun industry and NRA has had on politicians. Elections have been heavily influenced by the NRA in the past; I’m wondering if they want to disassociate themselves from this.

    I’d be interested in knowing more about how the gun industry works. It seems that the NRA is the gun industry’s marketing arm. A lot of NRA money comes from the gun industry. This is especially apparent when it comes to universal background checks; the NRA is fighting it even when most of their membership wants background checks. I have often wondered if the NRA was against checks because unlimited access by both criminals and law-abiding people increase gun sales. That is, when violent crime with guns increases, so do the sales of guns to law abiding people for protection. If this is true, the gun industry has no financial incentive to support gun crime prevention. Maybe that alone is a good reason for public funds to divest gun industry stocks. Right now there’s increased awareness of the product (guns) because it’s in the media. This is driving sales now . When the media attention subsides, sales may drop. If violent gun crimes subside, gun sales may also drop. Apparently they don’t want to adapt to a changing political environment. That might be another reason to divest in a company.

    Lastly, I’m a little concerned that the gun industry is giving states ultimatums about gun control laws; they’re saying that they will move their companies if gun control is passed. They are still trying to influence laws that will benefit the country. That’s something the public shouldn’t support.

  8. […] efforts to divert public pension funds occurred in the wake of the Newtown massacre. To protest gun violence, pension funds in New York City, Chicago, and California sold their stocks […]

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