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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.