Tobacco Divestment: A New Front in the Tobacco Wars
TOBACCO DIVESTMENT: a New Front in the Tobacco Wars
The national media have been buzzing this spring with reports of a major initiative in the struggle to promote a smokefree society:
- On May 7, Trustees of the New England Deaconess Hospital voted to remove all tobacco stock from its portfolio "as the latest example of the institution's commitment to prevention and treatment of smoking-related disease."
- On May 18, Harvard President Derek Bok acknowledged the divestment of over $58 million in tobacco securities because of a "desire not to be associated as a shareholder with companies engaged in significant sales of products that create a substantial and unjustified risk of harm to other human beings."
- The next day, acceding to Trustee Edith Everett and the other pro-health activists who testified in behalf of her resolution, the Board of Trustees of City University of New York voted to divest its $3.5 million of Philip Morris stock, noting that owning stock in a company "whose purpose is to addict to a lethal drug as many young people as possible calls our educational leadership into questions."
- On May 29, Governor Michael Dukakis declared his intention that the Commonwealth of Massachusetts divest its $31 million of tobacco stock held in state pension funds. And the NY Times reported on June 9 that Governor Mario Cuomo was leaning towards a similar action in New York.
These remarkable events are the earliest victories of the TOBACCO DIVESTMENT PROJECT, a new and dramatic initiative in the long-term battle to end the ravages of tobacco addiction.
The Tobacco Divestment Project was born of frustration -- the frustration among pro-health activists and education leaders across the country that, for all their efforts, smoking still abounds. Fifty-five million Americans still smoke; 390,000 still die each year from tobacco-induced illness. But the young people to whom tobacco companies target their $3.28 billion advertising budgets are unmoved by the health ravages of cigarette use, and over one million of our youth start smoking each year. So tobacco use continues to overtax our health care system and drive the costs of health insurance to such staggering heights. It drains business of billions of dollars in increased insurance and maintenance costs, absenteeism and lost productivity. And it continues to afflict smokers and their families with untold suffering.
Crowning this frustration is the fact that tobacco companies are still perceived as respectable, legitimate businesses. (See "The Teflon Coating of Cigarette Companies," PRIORITIES, Spring 1990.) Michael Kinsley, writing in a recent New Republic, is similarly baffled by this paradox. Wondering how history will regard our society's tolerance of so lethal and addictive a product, he asks:
"How could we have acknowledged the harm smoking does, and yet live so comfortably with that knowledge?...What will seem incredible...is the relative absence of stigma associated with the production and peddling of tobacco products. Tobacco companies are still regarded as relatively normal members of the business establishment. People work for them, invest in them, sell to them and buy from them without giving it too much thought."
And as Messrs. Kinsley and White both argue, the horrific ravages of tobacco addiction will not be brought under control until we first strip away the tobacco companies' "veneer of respectability." And this is the underlying purpose of the Tobacco Divestment Project.
The TOBACCO DIVESTMENT PROJECT champions a single, simple proposition: we should not profit from tobacco addiction. As individuals, and as members of institutions which We support with our efforts and our contributions, we will not place profits above the health and welfare of millions of citizens.
No individual or private organization should profit from tobacco addiction. But it is totally unconscionable for non-profit and public groups to invest in the leading preventable cause of death and disease in America.
- Hospitals which serve the sick should not reap dividends from the purveyors of sickness and death.
- Charities and philanthropies which hold tobacco securities violate the moral purposes they are organized to uphold.
- Universities should not be profiting from the exploitation of youth, minorities and third world nations (America exports over 112 billion cigarettes annually) by companies whose continual denial of the harm of smoking offends the very principles of higher education.
- States and municipalities, which bear the brunt of tobacco's true costs (in runaway health care and insurance costs), should set the moral example that business as usual -- profits before health -- can not continue.
Accordingly, the TDP champions board of directors and board of trustees resolutions calling for the divestment of tobacco securities in the pension, endowment and investment accounts of public and non-profit organizations.
"You think nicotine is addictive? What's really addictive is the money: that's why tobacco thrives!" Calvert Crary, tobacco litigation analyst, for Lave, Simpson and Amersand Co.
For many years, pro-health coalitions have focused their energies on prevention and cessation as a way to end the ravaging effects upon the health of smoker and nonsmoker alike which result from tobacco use. But the underlying problem which causes this devastation is devotion to profits. The profitability of tobacco is the fuel which drives and sustains the vicious cycle of addiction. Tobacco money given to non-profit community, artistic and educational organizations buys respectability for tobacco companies and forestalls, public indignation and censure. Tobacco money spent (in obscenely large amounts) on lobbyists and PAC contributions buys political influence to thwart effective regulation. And the enormous money which tobacco returns to its investors has led to our willful blindness to the implications of those investments.
Those who defend their tobacco investments argue that "if smokers choose to smoke, and smoking is legal, why shouldn't we profit from their behavior?" The legality of tobacco use begs the question. Yes, smoking is legal for adults: if it were suddenly declared illegal, we would have 55 millions additional criminals in this country. This is because most smokers are not smoking out of "choice": they are smoking out of necessity. Seven years' experience as a teacher and administrator of hospital-based smoking cessation programs has made it starkly clear to me that smokers -- however much they may indeed enjoy cigarettes -- continue to smoke only because they are physically and psychologically dependent: their choice has, in fact, been taken away from them. Thus, as Anthony Ramirez noted in the May 30, 1990 New York Times, the predictable, periodic price increases which tobacco companies pass along to their customers cause very little reduction in consumption and virtually no complaint from smokers. As billionaire Wall Street tycoon Warren Buffet, formerly a major shareholder in RJR-Nabisco, is quoted as saying: "I'll tell you why I like the tobacco business...It costs a penny to make. Sell it for a dollar. It's addictive. And there's fantastic brand loyalty." This is why tobacco has remained so profitable and so popular among investors.
As smoking becomes more and more a blue collar behavior, and as tobacco executives direct their marketing efforts towards minorities (where smoking remains more acceptable), tobacco profits can be seen almost as a tax upon the more economically disadvantaged segments of our society. Smokers are really twice victimized: they suffer the deterioration of health and loss of life caused by tobacco use; and they must also endure the periodic price increases which are passed along for no other reason than to prop up these enormous profits in the face of a diminishing customer base. As TDP Board member and US Trust VP Robert Zevin has pointed out, recent tobacco profits have come almost exclusively through price increases. True, our non-profit and governmental institutions are in dire need of funds: but the monies which come from tobacco investments are derived from those who can least afford it.
Spokesmen for the tobacco industry have tried to dismiss the TDP as a merely symbolic gesture which will have no major effect upon their financial strength -- that the $3.5 million which CUNY has divested, or event he $58 million of Harvard, are just a tiny fraction of the industry's overall capitalization. We are not so sure of this. The TDP has been established to provide consulting and support services to the thousands of pro-health activists throughout the country who have already been waging battle in the "tobacco wars" and who now are being provided with a new, powerful weapon to attack tobacco interests. As physicians, scientists, educators and civic leaders raise the divestment initiative at their own hospitals and universities, and as they challenge their local and state governments and their religious institutions to be true to their own moral values and social responsibilities, the demand for tobacco stocks may indeed shrink. As demand shrinks, stock prices will fall. In time, Harvard and CUNY may be admired for their remarkable financial prescience!
But this misses the point. The ultimate goal of the TDP is not to affect stock prices; it is to alter social perception, to "de-legitimize" tobacco. We will not curb tobacco additions as long as our institutions depend upon tobacco profits. Whether these profits are channeled to us as dividends from tobacco companies, or contributed by tobacco executives, or offered as grants from tobacco foundations, they interfere with our clarity and resolve to bring this crisis under control.
Once the institutions which society most honors -- our universities, hospitals, churches and philanthropies -- eschew tobacco profiteering, then politics will follow. We will see nationwide what has just occurred in Rhode Island: tobacco-free politics, the refusal by all the major political candidates to own tobacco stock or accept tobacco PAC funds. One of two congressmen and a sitting governor who did not take this pledge were excoriated in the press. When tobacco interests lose their (financial) control over legislators, effective regulation will follow. Excise taxes will be raised, with proceeds used to support education and prevention. Insurers will be required to cover smoking cessation programs. Workplaces will be declared smoke free. Most critically of all, laws to prevent the sale of tobacco to minors will be bolstered with stiff penalties and means for enforcement. And then, the tobacco wars will finally offer some hope of resolution.
HOW DIVESTMENT HURTS TOBACCO COMPANIES
- Participating in tobacco profits dampens our resolve to bring this ravaging addiction under control. How can we solve the crisis of tobacco addiction if we depend upon tobacco profits for our financial health?
- Divestment by universities, hospitals and religious institutions strips away the "veneer of respectability" which tobacco companies strive to maintain. Only in an atmosphere of indignation -- such as we have seen these past six months -- can effective regulation come about.
- The public outcry of the divestment initiative will make it more difficult for tobacco giants to acquire non-tobacco subsidies. Even though their profits come primarily from tobacco, these companies insulate themselves from public condemnation with the position that, "we're not just a tobacco company anymore."
- As non-profit and government institutions shun tobacco profiteering, the demand for these stocks will shrink: lower demand translates into lower value. This deflation in value reduces investor appeal further; and it becomes more difficult for tobacco companies to raise capital.
- As municipalities and states debate divestment, politicians will find it more of a liability to accept tobacco PAC money; this money is the only major hindrance to effective regulation. And as the political climate brings about effective regulation (effective control over sales to minors; restricted advertising; aggressive excise taxes; public and workplace smoking restrictions), the customer base begins to shrink. As we reduce the number of future smokers, tobacco profiteering will lose its enormous power.
American Council on Science and Health, Inc.
By Brad S. Krevor