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March 07, 2000
Shareholders Take on Tobacco Industry
After 20 years of resolutions, cigarette companies and others involved in the tobacco industry
still have plenty to learn from shareholders.
SocialFunds.com --
In the wake of several state lawsuits costing the tobacco industry hundreds of billions of dollars,
cigarette companies like Philip Morris have finally admitted that smoking causes lung cancer and a
plague of other diseases. But the debate over the responsibility of the tobacco industry for the
health of consumers is not over yet, as indicated by shareholder resolutions this proxy season.
 At least 16 resolutions have been filed with
companies for the 2000 season regarding the marketing and health effects of tobacco. Most of these
are filed directly with cigarette companies, Philip Morris, RJ Reynolds, UST, and Loews, while two
of them address the involvement of other companies, H.B. Fuller and Lincoln Insurance, with the
tobacco industry.
"Our approach to tobacco is not only to address the main companies but
the direct allies of the tobacco industry," said Rev. Mike Crosby, Province of St. Joseph of the
Capuchin Order, the coordinator of the tobacco program at the Interfaith Center on Corporate
Responsibility (ICCR). "We have been very successful in getting these allies out of tobacco--the
only one left of consequence that is publicly held is H.B. Fuller, whose adhesives are used in
manufacturing cigarettes."
Crosby has been at ICCR since 1973, and has been filing
shareholder resolutions on tobacco since 1980, but it took another few years before tobacco became
a big issue for them. But the increased awareness among shareholders and consumers, largely
promoted by shareholder resolutions, has brought many successes to the program in recent years.
For instance, Philip Morris agreed to put health warnings on all tobacco products sold
worldwide, not just in the U.S. where it is legally required. Many affiliated companies, including
Eastman Kodak, Kimberly Clark, Pfizer, and Sara Lee have abandoned their involvement in the
industry, to the tune of hundreds of millions of dollars.
The most recent success stems
from a resolution filed this year, concerning the accessibility of tobacco products to pilfering
teenagers. Tobacco products are the most heavily shoplifted item in the U.S., and one third of all
shoplifters are teenagers. This "shrinkage" is abetted by the prominent placement demanded by
tobacco companies, who pay thousands of dollars in "placement fees" to ensure their accessibility.
Crosby's Province of St. Joseph of the Capuchin Order withdrew their resolution, asking
Philip Morris to change their policies regarding retail placement, after the company agreed to
support state legislation regulating self-service displays. Keeping teenagers from "self-serving"
their way into tobacco addiction could make a major dent in future tobacco-related health
statistics.
Teen use of tobacco is a particularly strong component of the tobacco
resolutions this year. Four resolutions were filed with tobacco companies asking them to get
independent certification that their advertising campaigns are not equally or more appealing to
minors. These resolutions point out that cigarettes are the most heavily advertised product in the
U.S., and cited a study showing that teenagers are three times as responsive as adults to cigarette
ads.
Three more resolutions were filed with tobacco companies urging them to link
executive compensation with goals of decreased teen consumption of the company brands. These
resolutions ask executives who consistently state that they oppose smoking by minors to put their
money where their mouth is.
A resolution with Loews focuses specifically on their
marketing of Newport cigarettes to black Americans, contributing to a lung cancer death rate 50
percent higher than white Americans. A 1998 civil rights suit charged that the tobacco industry
targeted black Americans with ads for menthol brands, and that menthol additives may contribute to
the disproportionate smoking-related disease in the black American community.
Other
resolutions with tobacco companies include two urging Loews and Philip Morris to "spin-off" their
tobacco business from other businesses, and one filed with Philip Morris on how the company plans
to address the acknowledged cancer-causing effects of its products. This latter was filed by Dr.
Gregory Connelley, ICCR's main consultant on the issue.
Resolutions were filed with two
non-tobacco companies for their affiliation with the industry. Domini Social Investments, advisor
for the Domini Social Equity Fund filed with H.B. Fuller to stop selling adhesives used to glue
cigarettes together. Catholic Healthcare West filed with Lincoln Insurance, a prominent life
insurance provider, to divest itself of all tobacco stocks.
Twenty years of shareholder
resolutions concerning the tobacco industry have yielded great strides, but this proxy season's
slate shows that there are still miles to go. "Tobacco has been one of the successes that we
continually use to show that we aren't just peeing in the ocean with socially responsible
investing," said Crosby.
Most social investors are familiar with the strategy of screening
tobacco-related companies from portfolios. Although they require owning stock in tobacco or related
companies, a difficult proposition for some investors, these shareholder resolutions send a more
direct message to the industry.
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SRI World Group, Inc. All Rights Reserved.
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