Mastercard shareholders gathered for the card company’s annual meeting Tuesday nixed a shareholder proposal requesting the company’s board produce a report on ghost guns.

The non-binding proposal urged Mastercard’s board to evaluate and produce a report “describing if and how Mastercard intends to reduce the risk associated with the processing of payments involving its cards and/or its electronic payment system services for the sale and purchase of untraceable firearms,” according to Mastercard’s proxy filing. The report would have been due within the next year.

The proposal covered the “buy, build, shoot’ firearm kits” that include parts and accessories for privately assembling what are known as “ghost guns.” Such guns are unregistered and untraceable, which makes them difficult to track. The lead shareholder on the proposal was the Employees’ Retirement System of Rhode Island. 

Recent high-profile mass shootings, including one in May at an elementary school in Uvalde, Texas, have turned more attention to the financing of gun purchases. As a result, the card companies Mastercard and rival Visa are facing growing pressure to no longer allow payments for ghost guns on their networks, BuzzFeed News reported.

In April, the Biden administration announced new efforts designed to rein in ghost guns, and Los Angeles County and Bronx County district attorneys have asked the card networks to cut off payments for online ghost gun purchases. If implemented on August 24, 2022, as scheduled, the Biden rule will require manufacturers and distributors of these parts to become federally licensed, perform background checks prior to sale, and put serial numbers on the parts.

“To date, Mastercard has declined to disclose what, if any, steps the Company will take when the Rule takes effect – or what steps the Company will take if implementation of the Rule is delayed,” Seth Magaziner, the proposal’s author, said in a May 31 solicitation seeking support for the proposal. Magaziner is also the general treasurer of Rhode Island and a Democratic candidate for Congress.

Congressional candidate pushes proposal

"We are concerned with the ongoing reputational damage to the Company as lawmakers, law enforcement officials, prosecutors, and investors call for the Company stop facilitating the sale of ghost guns,” Magaziner said. “We are also concerned that inadequate board oversight at Mastercard will result in lengthy and costly litigation or require the Company to respond to enforcement actions, each of which may affect shareholder value."

In a brief statement Tuesday, Purchase, New York-based Mastercard said no shareholder proposals passed at the meeting and said final voting results will be filed later with the Securities and Exchange Commission.

The shareholder proposal cited the financial impacts of gun violence, including reduced business confidence, and said companies play an important role “in ensuring their activities do not contribute to community violence.” 

The proposal noted it has become easier to build firearms at home with kits or standalone parts. Such guns are “routinely seized from individuals who are prohibited by law from possessing firearms,” and the growing number of ghost guns has alarmed law enforcement, the shareholder wrote.

Between 2016 and 2020, close to 24,000 suspected ghost guns reported to the Bureau of Alcohol, Tobacco, Firearms and Explosives were recovered from crime scenes, the proposal noted. That included 325 homicides or attempted homicides, which includes deaths occurring during mass school shootings, the shareholder added.

Mastercard receives payment “for the use of its services and profits from its partnership with acquiring banks and the ‘ghost gun’ retailers they support,” the shareholder noted.

Investors were “concerned” that Mastercard’s involvement in payments for kits, components or accessories used to make ghost guns presented “regulatory, reputational, legal, and financial risks to investors,” the proposal said. The shareholder urged the board to “assess the company’s policy related to untraceable firearm transactions and report to shareholders on how it manages risks related to these transactions.” 

The card companies don’t work with gun merchants directly, but could tell banks such payments aren’t allowed on their payment rails, per BuzzFeed News. Visa and Mastercard have previously done this with websites Pornhub and Backpage, the media outlet noted.

“The quality of the brand is linked to corporate behavior,” Magaziner told BuzzFeed. “For Mastercard as a brand, it makes sense for them to disassociate themselves with socially destructive products, including ghost guns.”

Institutional Shareholder Services, which counsels some of the largest investment funds in the country, noted it was the first year Mastercard had received this proposal.

ISS had recommended shareholders vote against the proposal, saying Mastercard “appears to be taking appropriate action to mitigate risks in major areas of human rights and illegal purchases.”

ISS said the company “provides sufficient information on how it assesses, identifies, prevents, and mitigates human rights impacts,” and pointed to the Biden administration’s recently announced rules designed to regulate the sale and manufacturing of ghost guns.

Mastercard board responds

Mastercard’s board had recommended shareholders vote against the proposal, saying the company undertakes “a thoughtful consideration of the risks involved” when considering how its network is used to facilitate payments. The company said it already reports regularly to the board and board committees on issues related to gun transactions. 

With guidance from the board, Mastercard “has taken action to address stakeholder concerns regarding firearms and gun violence in the United States while honoring our core principles and adhering to our obligation to ensure that individuals may transact privately with others within the bounds of the law,” the response said.

That action includes calling on lawmakers “to enact meaningful policies to address gun violence,” because it’s the responsibility of elected officials to address the issue, the board contended. The board also said Mastercard has funded education initiatives and supported nonprofit programs. 

Mastercard takes “a vigorous approach” to making sure only lawful gun purchases are allowed on its network, and levies fines and suspends or terminates customer licenses “based on specific incidents if we identify a pattern of unlawful activity.” 

The company recently reminded customers of the need “to ensure that the merchants they onboard onto our network comply with state and local ordinances banning untraceable firearm parts,” per the proxy.

“Our work in these areas will continue,” the board said.

Mastercard’s board acknowledged the reputational issues associated with guns, asserting that consumer privacy would be impacted by a decision to gather more transaction information related to guns, and on a divisive issue like guns, “any decision to act or refrain from actioning itself generates potential reputational risk.”