Nuns Against Guns: A Case Study on the Use of Activist Shareholder Lawsuits to Force Corporate Change

The case is designed for undergraduate and graduate business students to discuss the role of activist shareholder lawsuits to force companies to change business practices and practically embrace principles of corporate social responsibility. This case examines the legal complaint in Adrian Dominican Sisters, et. el. Plaintiffs vs. Smith & Wesson Brands, Inc., et. el.. In Adrian Dominican Sisters, a group of nuns used their position as shareholders of Smith & Wesson to assert a derivative lawsuit against Smith & Wesson and its board members. The Critical Incident will address the procedural and factual requirements needed to successfully assert a derivative shareholder lawsuit against a company and its directors. Second, students will examine the legal defenses that the directors can raise, specifically the business judgment rule. Third, students will evaluate the practical consequences of such lawsuits, even when the companies prevail in court. Finally, students will examine the role of shareholder activism as a tool to encourage corporations to change business practices and embrace principles of corporate social responsibility.