Earlier this year, two of the largest weapons manufacturing companies held their annual shareholder meetings and voted on proposals meant to address human rights. General Dynamics and Lockheed Martin, whose tanks, missile systems, and other products have been used in conflicts around the world, were pressed to adopt shareholder proposals highlighting a need for due diligence and human rights impact assessment procedures to better address the damage their weapons cause.
While these shareholder initiatives did not pass at these meetings, both proposals received a significant amount of shareholder support, signaling that the approach offers promise to prevent — or at least make more difficult — the funneling of weapons to irresponsible actors or those that harm civilians.
THE NOVEL APPROACH
At General Dynamics’ annual shareholder meeting in May 2021, the Franciscan Sisters of Allegany, NY, cited concerns over the use of General Dynamics’ products in violating human rights to life, liberty, and personal security among others. They also brought up a recent report where human rights organizations linked “General Dynamics weapons and component parts to human rights violations, including alleged war crimes resulting from civilian deaths in Yemen, Palestine, and other conflict-affected areas.” The Sisters own shares in the company in part so they can raise such ethical questions during these meetings.
When 20% or more of shareholders in two of the world’s largest weapons manufacturers vote in favor of more comprehensive due diligence and reports on human rights, it’s time to take notice.
The Sisters’ proposal asked for General Dynamics to conduct human rights due diligence — a risk management process generally aligned with the UN Guiding Principles on Business and Human Rights, which outlines corporate responsibilities to protect human rights. These guidelines state that companies should “seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts.” Good due diligence practices can include making assessments of the risks associated with the company’s products in conflict and following up regularly with clients about how they have used the weapons they’ve purchased to mitigate human rights impacts. Due diligence regimes could prevent weapons companies from engaging in contracts that may be associated with human rights violations, and further cease ongoing controversial engagements that risk General Dynamics by association.
Such diligence helps companies identify, prevent, mitigate, and remedy adverse human rights impacts that may expose the company to financial, legal, or ethical liabilities. For example, there could be new legal risks due to General Dynamics’ investments and production in the nuclear weapons industry, now that the Treaty on the Prohibition of Nuclear Weapons — banning any involvement in the industry — has entered into force and is international law, even if the United States is not a member of said treaty. In other words, as more and more countries sign the treaty, investments in nuclear weapons will become more unstable, and both manufacturers may see a shrinking market in the future. This rapid decline in production and sale already happened with landmines after the Mine Ban Treaty banning anti-personnel landmines came into force in 1999.
Citing the Treaty on the Prohibition of Nuclear Weapons, the Sisters stake key claims about the importance of complying with international law. At the same time, numerous financial institutions are moving away from investments in the nuclear weapons industry as norms to avoid existential risks in the sector grow, making the production and investment in them an increasingly questionable financial choice.
Before the May 2022 meeting, the General Dynamics board of directors recommended voting against the Sisters’ proposal. Despite this opposition, the proposal received 25.2% support in preliminary shareholder voting. This notable show of approval signals an important appetite among at least one-quarter of the company’s investors to better address the harmful implications and uses of the company’s products.
A rather similar story took place in late April 2022 at the annual shareholder meeting for Lockheed Martin, the world’s largest arms manufacturer. During the meeting, the Sisters of Charity of Elizabeth, NJ, School Sisters of Notre Dame Cooperative Investment Fund, and Sisters of St. Francis of Philadelphia called for a human rights impact assessment report. The proposal identifies concerns regarding Lockheed Martin’s weapons exports and sales to states in the midst of armed conflicts, such as Yemen and Israel-Palestine. Lockheed Martin’s products contribute to the harm and violence experienced by people in the midst of these conflicts, claim the Sisters, necessitating moral concern and responsibility to acknowledge their impact at the manufacturing level.
Reputational risks associated with profiteering from the Russia-Ukraine War were also highlighted in the proposal, citing criticism of Lockheed President and CEO Jim Taiclet for seeing the potential conflict as an opportunity for growth during an earnings call in January. As at General Dynamics, the board of directors at Lockheed Martin advised shareholders against this human rights proposal. Yet, the initiative still received 20% support from its shareholders.
BECAUSE THE LAW IS NOT ENOUGH
The points brought up by these two proposals show concern over these companies’ relationships and risks by association with conflicts or states that use their products to violate human rights. The shareholders’ concern when filing these proposals is not only over human rights but also the complacency of these companies in continuing their contracts with controversial actors. These concerns could be remedied by contracts that analyze the risks of human rights violations or comprehensive human rights due diligence to assess the risks of the company’s products in conflict.
Calls for these relatively simple remedies could have an enormous impact. If adopted, these initiatives may enable two of the largest weapons companies to thoroughly re-evaluate their roles in conflicts where human rights violations are rampant. They could also potentially hinder further violations by stopping certain sales. US law has regulations and guidelines on foreign military sales that companies such as Lockheed Martin and General Dynamics must follow. However, compliance with US law is not enough to meet responsibilities under UN Guiding Principles on Business and Human Rights and does not insulate companies from the risks outlined by the Sisters.
When 20% or more of shareholders in two of the world’s largest weapons manufacturers vote in favor of more comprehensive due diligence and reports on human rights, it’s time to take notice. Earlier this year, other initiatives at companies such as Raytheon and Sturm Ruger also turned heads toward the issues of human rights due diligence in the weapons manufacturing sector. In the midst of numerous conflicts from Ukraine to Yemen, shareholders are increasingly concerned about complacency in these industries. Profiting off increased weapons demands, especially those associated with humanitarian crises and atrocities, should have ethical and moral considerations if these companies are to avoid financial, legal, reputational, or ethical liabilities.
Magritte Gordaneer is the Arms Trade Research Intern at the Forum on the Arms Trade.