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2012
Shareholder
Meetings
--
Tobacco,
BIG
3
Here are reports on
three tobacco shareholder meetings in
2012.
2012 Reynolds
American,
Inc., RAI
Reynolds American, Inc., RAI -- May 3, 2012,
Winston-Salem, North Carolina,
in the Reynolds American Plaza Building Auditorium.
There is no-smoking allowed in the
auditorium during the meeting.
List of companies owned by
RAI
Report on the meeting by
Edward L. Sweda,
Jr.
There is no audio web cast of the
Reynolds American Inc. meeting, and official minutes do not reflect any
shareholder interaction in questions and support of the resolution
statements. Therefore, the
report by Edward Sweda is especially important in giving an overview of
the meeting.
Shareholder
resolution,
and
the statement in opposition to it from RAI, for the Creation of an
Ethics Committee to Review
Marketing Activities, which did not pass
The CEO and Board Members
of RAI
2012 Philip Morris
International, PMI
Philip
Morris
International, PMI -- May 9, 2012.
There is no-smoking allowed in the
auditorium during the meeting.
2012 Altria Group,
Inc.
Altria Group, Inc. -- May
17, 2012.
There is no-smoking allowed in the
entire building of the Richmond (Va) Convention Center where the
meeting was held.
REYNOLDS
AMERICAN, INC. -- RAI
Reynolds American, Inc., RAI -- May 3, 2012,
Winston-Salem, North Carolina,
in the Reynolds American Plaza Building Auditorium.
There is no-smoking allowed in the
auditorium during the meeting.
Reynolds
American, Inc. includes
the following companies:
American
Snuff Co.
Santa Fe Natural Tobacco Co.
Niconovum AB
The CEO of RAI
is Daniel M. Delen, as of
March 1, 2011, with both domestic and international tobacco company
experience.
Other Board Members as listed in the company shareholder booklet are as
follows:
Thomas C. Wajnert
Non-Executive
Chairman since 2010; a principal of The
Alta
Group, a global consultancy focused on the financial
services sector, retired founder, chairman and CEO of AT&T Capital
Corporation.
John
P. Daly
Chief Operating
Officer of British American Tobacco
BAT.
Martin
D.
Feinstein
was the CEO of Farmers Group, Inc., insurance
firms.
Luc
Jobin
Executive Vice
President and Chief Financial Officer of Canadian National Railway Company,
CN,
formerly
Executive
Vice
President
of
Power
Corporation of Canada, PCC,
an international management and holding company, and formerly President
and Chief Executive Officer of
Imperial Tobacco from 2003 until joining PCC.
H.
Richard Kahler
Retired from Caterpillar Inc. where he served in
Asia, China, Indonesia.
Holly
K. Koeppel
Co-Head of Citi Infrastructure Investors,
formerly a vice pres. of American
Electric Power Co., Inc.
Nana
Mensah
He has been
Chairman and CEO of 'XPORTS, Inc.,
which
exports
food
packaging
and
food
processing
equipment
and
pharmaceuticals
to
foreign
markets,
formerly
Chief
Operating
Officer
--
Domestic
of
Church's Chicken,
a division of AFC Enterprises, Inc. He is a Distinguished Fellow
at Georgetown College in Kentucky, currently serves on the boards of trustees of the
Children's Miracle Network and the Kentucky Children's Hospital,
and board of directors of World Trade Center Kentucky.
Lionel
L.
Nowell
III
retired from PepsiCo where he was Senior Vice
President and Treasurer, and earlier Chief Financial Officer for Pepsi Bottling Group; he joined
PepsiCo in 1999 from RJR
where he was Senior Vice President, Strategy and Business Development.
H.G.L.
Powell
Retired from Interbrew S.A. an international
company, where he was CEO.
Richard
E.
Thornburgh
Formerly Vice
Chairman
of Corsair Capital LLC, an
international company.
Neil
R. Withington
Director, Legal
and Security, and Group General Counsel of British American Tobacco BAT, and
is one of the executive officers of BAT designated by B&W for nomination to the board
under the terms of the Governance Agreement.
John
J. Zillmer
President and CEO
of Univar, global distributor of industrial and specialty chemicals and
related services; formerly Chairman and CEO of Allied Waste Industries,
Inc.
Report entered May 25, 2012, on the May 7, 2012
meeting of RAI,
by Edward L. Sweda, Jr.,
entitled:
Reynolds American
Inc. in 2012: “Progress” in tobacco litigation is
alleged five weeks after U.S. Supreme Court leaves the company with
“massive liability…with no end in sight.”
Photos by Mr. Sweda
along with his report are at
this
link.
By Edward L. Sweda, Jr.
Three
key issues were taken up at the 2012 Reynolds American Inc.
(RAI)
Annual Shareholders Meeting in Winston-Salem, North Carolina on May 3rd.
First, the issue drawing the most public attention was the
company’s
dealings with groups representing farm workers who toil under dangerous
conditions and provide the tobacco that brings prosperity to the
company and its key executives. At least 20 individuals who attended
the meeting dominated the question-and-answer session, urging the
company to meet directly with the
Farm Labor
Organizing Committee (FLOC) after many years of failing to
achieve such a meeting. Reynolds
American CEO Daniel M. Delen publicly pledged that he would be willing
to participate in such a meeting. Dozens of protesters outside the
building underscored the message of the supporters of the human rights
of tobacco farm workers.
Delen also touted an April 2012 “multilateral” meeting in Raleigh as a
first step in addressing issues of
inadequate
worker
safety
in
the
tobacco
fields
of
North
Carolina. [See
Oxfam
America’s
report: “A State of Fear: Human Rights Abuses in North
Carolina’s Tobacco Industry”]
A second issue was contained in the
shareholder
resolution
that called
on RAI to establish a special ethics committee to examine the
company’s
marketing practices. The purpose of this special committee is “to
ensure shareholders that its products and product promotions, as far as
is possible, not undermine efforts of governments at any level to adopt
laws and practices that will free Americans from the negative
consequences of use of our tobacco products.”
In addition to commenting on the text of the resolution,
Father Michael
Crosby denounced RAI’s heavy-handed campaign to oppose California’s
Proposition 29, which would raise that state’s cigarette excise tax
by
$1 per pack and increase taxes on cigars and pipe tobacco from 31.73
percent to 54.89 percent. If passed by the voters, the proposal would
raise about $735 million annually, most of which would go toward cancer
research.
Fr. Crosby also cited the company’s
support of the right-wing political
organization ALEC, the American Legislative Exchange Council, whose
stealth activities have come under increased scrutiny following
public
disclosures of ALEC’s drafting of and advocacy for Florida “Stand Your
Ground” law and several states’ anti-immigrant legislation.
The shareholder resolution was defeated, according to the preliminary
tally reported at the meeting, with 6.4 million shares in favor, 418
million shares opposed and 6.3 shares abstaining.
The
third key issue was litigation,
specifically RAI’s “litigation
progress” – or lack thereof – in dealing with the Engle Progeny cases
in Florida. During the business presentation by Mr. Delen, RAI’s
CEO
stated that, since 2010, RAI had been “successful” in two-thirds of the
Engle Progeny trials. Such “successes” included not only defense
verdicts but also – for the first time publicly stated in this author’s
memory at any tobacco company’s shareholders meeting – mistrials (such
as when a jury is deadlocked without being able to reach a verdict).
In 2009, a Florida jury awarded $3.3 million in compensatory damages
and $25 million in punitive damages against Reynolds American in a case
involving the death of Benny Ray Martin, the husband of Mathilde
Martin. Her case is one of thousands of “Engle Progeny” lawsuits in
Florida, cases that followed the landmark 2006 ruling by the Florida
Supreme court in Engle v. Liggett Group, Inc., 945 So. 2d 1246 (Fla.
2006). After losing on appeal at every stage in the Florida’s state
court system, RAI filed a petition for certiorari with the Supreme
Court of the United States.
In arguing in December 2011 that its petition for a writ of certiorari
should be granted, Reynolds’ attorneys (Paul D. Clement of Bancroft
PLLC, Gregory G. Katsas of Jones Day and Eric E. Murphy of Jones Day)
claimed that in “their conduct of Engle progeny litigation, the Florida
state courts are engaged in serial due-process violations that
threaten the defendants with literally
billions of dollars of liability.” (emphasis added) Moreover,
“the
massive liability
imposed on the Engle defendants – which currently stands at over $375
million in adverse judgments – will… steadily increase as
Engle progeny trials continue with no end
in sight.” (emphasis added).
RAI’s attorneys’ description of doomsday for the company became reality
on March 26, 2012 when the Supreme Court announced that it would not
consider RAI’s appeal in the Martin case.
As
I
described
at
the
time,
“At
long
last,
Reynolds
American
and
the
other
major
tobacco
companies
will
be
held
accountable
for
their
massive
and
reprehensible
misconduct
that
harmed
thousands
of
Florida
smokers.
As
Reynolds’ own lawyers have
concluded, denial of its cert petition is a very big deal indeed.”
Citing the
question
I
asked
at
the
2011
Reynolds
American
Shareholders Meeting about the Martin case, the response I received
from Mark Holton, RAI’s Executive Vice President and General Counsel,
that he was “confident that the Engle process violates due process” and
that the company’s legal arguments were strong and would ultimately
prevail, and the fact that on March 26, 2012 the U.S. Supreme Court
refused to consider RAI’s appeal of the $28 million verdict, this RAI
shareholder from Massachusetts asked the following question:
“Given how Mr. Holton got it wrong last year about this important case,
why shouldn’t investors and shareholders be skeptical when they hear
pronouncements by Reynolds American management about tobacco
litigation?”
In response, Mr. Holton acknowledged what the Supreme Court had done
regarding the Martin case, but cited what he called “encouraging”
developments with two appeals of plaintiff verdicts in the state court
system in Florida. This included a March 30th ruling by Florida’s
Second District Court of Appeal affirming a $2.5 million wrongful death
verdict against Reynolds American and Philip Morris USA. In that appeal
of the Douglas case, the Court of Appeal also certified the following
question to the Supreme Court of Florida: “Does accepting as res
judicata the eight Phase I findings approved in Engle v. Liggett Group,
Inc., 945 So. 2d 1246 (Fla. 2006) violate the tobacco companies’ due
process rights guaranteed by the Fourteenth Amendment of the United
States Constitution?”
Mr. Holton notably did not address the doomsday scenario outlined by
his company’s attorneys who filed the writ for certiorari. So, in a
span of just five months, this RAI shareholder received from the
company diametrically polar opposite predictions concerning the future
of tobacco litigation, depending on which side of the Reynolds American
corporate mouth was talking.
At Reynolds American 2012 --
Shareholder Proposal for the Creation
of
an
Ethics
Committee
to
Review
Marketing
Activities:
This particular proposal was submitted by
the Rev. Michael Crosby
Province of Saint
Joseph of the Capuchin Order, representing several Catholic groups
within the Interfaith Center on
Corporate Responsibility, ICCR.
From
the Shareholder Booklet, pages 81-82.
Followed by RAI's statement of opposition.
NOTE: Shareholder resolutions
must go through a rigorous process at the U.S. Securities and Exchange
Commission before they are permitted to be presented at a shareholder
meeting. The wording must be approximately 500 words or
less. The company response is of course much longer in their own
booklet.
At the shareholder meeting, Michael Crosby moved the proposal, and
Edward L. Sweda, Jr. seconded it. Here is the text of the
resolution
itself.
WHEREAS, Reynolds
American, Inc. acknowledges the use of our Company's tobacco products
is potentially devastating. However, in the opinion of this
shareholder's proponents, Reynolds has evidenced a pattern of
challenging local, state and federal efforts aimed to reduce dependency
and use of tobacco. This has been done primarily through efforts
to impact legislation.
"Though RAI does not sell abroad, recent
data compared the impact of the introduction of pictorial warnings in
Australia in 2005 to that of the introduction of larger text-only
warnings in the United Kingdom in 2003. Cognitive and behavioral
indicators of label impact that are predictive of quit intentions and
quit attempts (e.g. foregoing cigarettes because of the labels;
thinking about the health risks of smoking) increased to a greater
extent among smokers after the Australian pictorial warnings were
introduced than they did in the United Kingdom after enhanced text-only
warnings were introduced. Pictorial warnings are also cited by
former smokers as an important factor in their attempt to quit and have
been associated with increase in the use of effective cessation
services, such as toll-free telephone 'helplines.' Although all
warnings are subject to wear out over time, pictorial warnings have
also been shown to sustain their effects longer than text-only warning
labels (see 'The Impact of Pictures on the Effectiveness of Tobacco
Warnings,' Bulletin of the World
Health Organization 2009: 87:640-43).
Despite such data showing that graphic
warnings contribute to less smoking and, therefore less disease and
deaths, our Company joined others in successfully challenging a Food
and Drug Administration requirement that tobacco companies place such
pictorial evidence of the consequence of using our products on all
cigarette packages by September 2012. Consequently, in the name
of pursing 'freedom of speech' more people will lose their freedom of
choice by becoming addicted to our products.
"RAI also resisted the Framework
Convention on Tobacco Control which was created to reduce dependence on
cigarettes worldwide. It also vigorously fought against the
Master Settlement Agreement which had companies compensate States for
monies they had to expend for tobacco-related illnesses.
"Evidence from the North Carolina
Department of Public Health, [NC] home to our Company, revealed that
there was a 21 percent drop in emergency room admission for heart
attacks during the first year of a smokefree law in that state, saving
an estimated $3.4 to $4.3 million in health care costs.
"RESOLVED:
That
Reynolds
American,
Inc.'s
Board
of
Directors
create
a
special
ethics
committee
to
review
any
and
all
marketing
efforts
of
our
Company
to
ensure
shareholders
that
its
products
and product promotions, as far
as is possible, not undermine efforts of governments at any level to
adopt laws and practices that will free Americans from the negative
consequences of use of our tobacco products."
The proponents have submitted the
following statement in support of this proposal:
"Despite the fact that tobacco companies
have created departments of 'corporate responsibility' the practices
noted above seem to continue unabated. Thus the need for such a
effort to ensure our lethal product not do more damage than is already
being done to unsuspecting people."
The response from Reynolds American Inc., pages
82-83 of the
Shareholder Booklet, 2012.
Your Board of Directors recommends a
vote AGAINST this proposal.
RAI
and its operating companies are committed to using only responsible,
accurate advertisements, directed at tobacco consumers of legal
age. RAI supports reasonable warnings on cigarette packs,
including the current Surgeon General's warnings. RAI likewise
supports the content of the new textual warnings required by the Family
Smoking Prevention and Tobacco Control Act, which Congress enacted in
2009. RAI, however, believes that the pictorial warnings proposed
by the U.S. Food and Drug Administration, referred to as the FDA --
which must occupy the top half of both sides of cigarette packages, the
top fifth of advertisements, and include gruesome images --
impermissibly interfere with the ability of RAI's operating companies
to communicate with fully informed adult tobacco consumers. As
the Supreme Court has stated, because "the sale and use of tobacco is
lawful for adults, the tobacco industry has a protected interest in
communicating information about its products and adult customers have
an interest in receiving that information." Lorillard Tobacco Co. v. Reilly,
533 U.S. 525, 571 (2001).
This
proposal therefore should be rejected. First, the pictorial
warnings on cigarette packaging cited in the proposal are neither
effective nor are they a reasonable means of conveying to an informed
public the dangers of smoking. Second, the proposal is
unnecessary because the marketing of tobacco products is already
heavily regulated. Third, the proposal is also unnecessary
because RAI's operating companies have already taken proactive steps
that exceed current legal requirements to prevent youth tobacco use and
to direct its advertising only to customers of legal age.
In
the first place, the public is already well aware of the risks of
smoking. The proposed pictorial warnings therefore are neither an
effective nor a reasonable means of conveying to the public a message
regarding the dangers of smoking, since current public awareness of
these dangers is extraordinarily high. Nor would they decrease
smoking prevalence. In fact, according to the FDA's own
cost-benefit analysis of the pictorial warnings, the benefits from the
warnings in terms of reduced smoking rates are "in general not
statistically distinguishable from zero." 76 Fed. Reg. at 36,776
(June 22, 20122). Instead, RAI believes that the primary effect
of the pictorial warnings would be to conscript cigarette packages as,
in the words of the Secretary of Health and Human Services, a
"mini-billboard" for the FDA's anti-smoking message. This in turn
impermissibly interferes with RAI's operating companies' abilities to
communicate with fully informed adult consumers and to compete with
other manufacturers for market share.
RAI
therefore believes that the pictorial warnings violate the First
Amendment to the U.S. Constitution. Under the First Amendment,
the U.S. Government is free to engage in anti-smoking policy
advocacy. It is likewise free to require purely factual and
uncontroversial warnings on lawful consumer products, like tobacco
products, in order to prevent consumer deception. But the U.S.
Government may not commandeer the most visible portions of RAI's
operating companies' packages and advertisements as "mini-billboards"
for anti-smoking advocacy. This, however, is exactly what the
proposed pictorial warnings do, which is why a federal district court
in Washington, D.C. recently entered a ruling preliminarily enjoining
the FDA from requiring them. See
R.J.
Reynolds
Tobacco
Company
et
al
v.
U.S.
Food
&
Drug
Administration, Civil Case No. 11-1482 (RJL) (Nov. 7,
2011). Asserting the companies' First Amendment rights in
challenging the FDA;s rule does not in any way undermine the
government's legitimate interests.
Moreover,
the
proposal
is
unnecessary
because
the
marketing
of
tobacco
products
is
already
heavily
regulated.
For
example,
longstanding
federal
law
prohibits
all
cigarette
advertising
on
radio
or
television. See
15 U.S.C. 1335.
Likewise, RJR Tobacco is bound by the Master settlement Agreement with
numerous state attorneys general, which prohibits, among other things,
advertisements targeted at youth, the use of cartoon images, the use of
billboards, the use of tobacco brand-logoed merchandise, and payments
for the use of tobacco products in movies and TV. Finally, the
Family Smoking Preventions and Tobacco Control Act accords the FDA
broad regulatory authority over the manufacture, marketing, and sale of
tobacco products.
Finally,
the
proposal
is
also
unnecessary
because
RAI
and
its
operating
companies
have
already
taken
proactive
steps
to
combat
youth
tobacco
use
and
to
direct
its
advertising
only
to
customers of legal age.
In 1991, RJR Tobacco launched its Right Decisions Right Now: Be
Tobacco Free program, to help reduce youth experimentation with all
forms of tobacco. The program provides materials free of charge
to roughly 22,500 U.S. middle schools, and smoking levels decreased
significantly in test schools. in 2008, the program was validated
by the federal Substance Abuse and Mental Health Services
Administration as an evidence-based youth tobacco prevention
program. Likewise, RJR Tobacco's direct marketing materials and
access to its brand web sites are provided only to individuals who
provide affirmative proof that they are 21 years old or older and
attest that they are current tobacco users. These and other
restrictions are described in detail on RJR Tobacco's web site ...
As a
result of the foregoing, communications by RAI's operating companies
about their tobacco products are closely scrutinized, internally by
multiple layers of accountability and externally by third
parties. Indeed, it is difficult to conceive of a greater level
of scrutiny by more diverse viewpoints and constituencies than that
which exists at present. The proposal for a "special ethics
committee to review any and all marketing efforts of our Company,"
therefore, is redundant and unnecessary. Instead, it would simply
add a layer of corporate bureaucracy that would, in turn, undermine
RAI's ability to compete and to offer its perspective to the public
policy dialogue.
Therefore,
your
[RAI]
Board
of
Directors
urges
you
to
vote
AGAINST
this
proposal.
PHILIP MORRIS
INTERNATIONAL -- PMI
Philip
Morris
International, PMI -- May 9, 2012.
There is no-smoking allowed in the
auditorium during the meeting.
The CEO of PMI is Louis C. Camilleri. He was
formerly the CEO of Altria Group, Inc., and a director of Kraft Foods
Inc.
Other Board Members as listed in the 2012 company shareholder booklet
are as
follows:
Harold Brown
Now 84, formerly
was a partner of Warburg Pincus, a private equity firm; Chairman of the
Foreign Policy Institute at The Johns Hopkins University School of
Advanced International Studies; served as Secretary of Defense for the
USA from 1977-1981.
Mathis
Cabiallavetta
Vice Chairman of
Swiss Re Ltd., formerly director and chairman of Marsh & McLennan.
J.
Dudley Fishburn
Chairman of
Bluecube Technology Solutions Ltd.; Conservative Member of Parliament
in the United Kingdom 1988-1997; formerly Executive Editor of The Economist; director of various
groups including the Foundation for
Liver Research.
Jennifer
Li
Chief Financial
Officer of Baidu, Inc., largest internet search engine in China.
Graham
Mackay
Chief Executive
SABMiller pic, beer business in South Africa.
Sergio
Marchionne
CEO of Fiat S.p.A.
Kaipana
Morparia
CEO of J.P. Morgan India Private Ltd.;
serves as a director of Dr.
Reddy's Laboratories Ltd.
Lucio
A. Noto
Managing partner,
Midstream Partners LLC; retired as Vice Chairman of ExxonMobil
Corporation; serves as director on IBM, Shinsei Bank and Commercial
International Bank.
Robert
B.
Polet
Chairman of
Safilo Group S.p.A. in Italy; formerly President of Unilever's
Worldwide Ice Cream and Frozen Foods; serves as director on groups
including Wilderness Holdings Ltd.
Carlos
Slim
Helu
Chairman of
Impulsora del Desarrollo y el Empleo en America Latina, A.A.B. de C.V.;
formerly on Altria board; serves on Patronato
del
Hospital
Infantil.
Louis Camilleri announced at the
beginning of the meeting that all of the board of directors were
present except for Carlos Slim, apparently away on business.
Please Note: Carlos Slim for
several years was a director with
Altria. Slim has been recognized as one of the wealthiest persons
in
the entire world.
Stephen
M.
Wolf
Chairman of R.R.
Donnelley & Sons Co.; formerly CEO of US Airways; formerly CEO of
United Air Lines Inc.; formerly director of Altria; trustee emeritus of
the Brookins Institute.
QUESTION AND ANSWER
SESSION
-- This occurred prior to the presentation of the two shareholder
resolutions. Each questioner was to be allowed two minutes, with
one hour set aside for the entire Q&A session. Louis Camilleri noted that he
would "expect mutual respect on differing views".
There were intense and thoughtful questions from
several representatives of Corporate
Accountability International, regarding the Framework Convention on Tobacco Control,
health
matters,
the
marketing
practices,
and
other
questions
on
PMI's
actions.
There were the usual
comments from some shareholders who objected to having activists
present, and the usual comment from Louis Camilleri that it is a
democracy. As usual, some shareholders complimented Camilleri for leadership, and
one asked for and received applause to show appreciation for Camilleri.
There were the usual
comments from people who claimed that lots of people smoke and do not
die of cancer, and why should smokers have to pay taxes on a product
which they cannot use in many public places. Camilleri inserted a remark he has
used more than once in earlier years and said some activists are
"blinded by their hate".
A woman noted that in 2011 Camilleri
had said it was not difficult to
quit smoking, but she had tried five times, and it was extremely
difficult to stop. She asked if he had tried to quit, and
how long it took him. Camilleri
replied that this was another example of how the media misconstrues
things, and that of course it is "excruciatingly difficult" for many
people to quit, but he did not think one should dwell on that, for it
was depressing for people to hear, and they would not quit.
A man asked whether PMI would
consider growing marijuana for medicinal use, and Camilleri said the company does
not grow tobacco, so they would not be growing marijuana. The
questioner did not ask about marketing possibilities, and Camilleri did not pursue the
subject.
Hannah from Utah stated
that she comes from a family of Marlboro smokers, that her dad cannot
quit smoking and has several health problems as a result. She
noted that Camilleri had talked about the retirement of some people,
but she said some people do not live to retire when they smoke. Camilleri said he was sorry about her
Dad, and she should try to get him to quit smoking.
Julie, said: I'm actually
from New York. ... you said you do
not target youth --I just got back from the Philippines visiting
my family. While we were out shopping, there were actually pencil
cases for children with your company name. ... Adults don't use pencil
cases. ...
Camilleri said: I'm
actually not aware of that promotion. Honestly, that's the first
time I've heard of this. [He promised to get
back to her about this after he investigates it.]
A few additional
outstanding remarks are given below, transcribed from the audio web
cast on the company web site.
Allen
Frankel: Mr. Frankel commented that
there is disparity between the liquor industry and the tobacco
industry, and that "the tobacco industry is the most hounded industry"
of all corporations.
In response, Camilleri noted all industries have regulations, and:
Camilleri: I think the
important thing here is that we recognize that regulations on tobacco
is important, and whilst there are skeptics in the room, we have been
vocal advocates for regulation because we think it is important.
And furthermore, ultimately, the real solution in the issue comes down
to the product. And our hope is that in the coming years we will
be in a position to launch next generation products that effectively
reduce the risk and the harm associated with tobacco. In the
meantime, we will continue to push for regulation which we think
will make sense, be cohesive and coherent, and not have the potential
to backfire.
Question
and
Answer
exchange
between
ABC
News
journalist
Dan
Harris
and
CEO
Louis
Camilleri:
Camilleri -- Sir, Good Morning.
ABC News journalist, Dan Harris: Good Morning. My
name is Dan Harris, I'm from ABC News. I' m holding a picture of
a Marlboro kiosk in Jakarta Indonesia, that is steps away from the
front gate of a school. At this kiosk, which as you can see is
branded Marlboro, they sell cigarettes individually for a dime.
Do you think this is an acceptable way to market your product?
Camilleri -- No.
[microphone off, but Harris can be barely heard continuing to talk]
Camilleri -- I can't hear you.
Harris, turn my mike back on! [they did]
Harris -- We sent you a letter about this kiosk 9 months ago --
we then broadcast it on national television. We checked just a
week ago, it's still there. How do you defend that?
Camilleri -- Well, I'm glad you brought it up because I guess I
saw your program on 20/20,
and it was a very powerful program. We have a policy that we
should not advertise or have billboards in place next to schools
anywhere in the world including Indonesia.
The kiosk you mentioned, we actually looked for it, and we couldn't
find it. So I'm glad you know exactly where it is. So why
don't you give us the address of that kiosk, so we can actually go and
see for ourselves. I think it's very important for shareholders
to understand, however, that kiosks are set up by independent
parties. We don't have any kiosks, and we don't in any way
sponsor retail shops as you claim.
However, I think that it's very important because Indonesia has been a
very sensitive subject and at times the two documentaries, one of them
was yours, another one I think was produced by the Van Guard group, if
I'm correct, which essentially had the same themes.
So I'm glad you came, and it gives me an opportunity to talk about
Indonesia for the benefit of all shareholders. First by way of
background, the government has been criticized for treading rather
lightly in terms of the tobacco industry. I think that's a slight
unfair characterization. The fact is that the tobacco industry is
the largest employer after the government in Indonesia. It is
also a source of significant government revenues. And whilst
there are four or five significant manufacturers there are some more
than 600 manufacturers present in Indonesia. And I say this not
as a matter of excuse or anything, but for you to understand the
complexity of the issue and the various competing interests that are
there.
So, we entered Indonesia in 2005. So what have we done in
Indonesia since we entered, both voluntarily and from a legislative
point of view.
Voluntarily, we have essentially discontinued a number of the
promotions that were going on before we bought Sampoerna. We no
longer sponsor any sports. Marlboro is not on television as
opposed to what the documentaries would show. Furthermore, the
two programs that are referred to both in your documentary as well as
the other one regarding music were discontinued in 2008 -- that's four
years ago. Yet the documentaries would lead people to believe
that they are still on.
In terms of concerts -- the posters announcing concerts do not have any
branding. We are the only ones who do that. The concerts
that take place are held in enclosed locations where there is very
strong, very strict age verification before anybody can enter those
locations.
In terms of TV advertising, which as you know is legal in Indonesia, we
have reduced
our TV advertising quite substantially. We are now down in terms
of sharer voice in the teens, when we bought Sampoerna we were at
30%. And the list goes on. We've taken a number of
voluntary measures to try to reduce the impact of marketing and
advertising.
On the legislative front, we've been very vocal advocates of marketing
restrictions, graphic health warnings, public smoking restrictions,
education, and other measures.
And there is good news -- finally, good news. It is our
understanding that a tobacco control bill is on the desk of the
President. And when he signs it it will become law, and it
includes a lot of the measures we have pushed for despite the
opposition from numerous other circles. So there is progress.
I thank you for your program because it helped, and I would encourage
you and others to press the government to continue to institute tobacco
regulation that is fair and makes sense, and above all to ensure that
kids do not have access to cigarettes, and that parents are educated
about the dangers, the dramatic dangers, and the disease causes that
smoking can create in Indonesia.
Thank you.
[audience applause]
[off microphone -- Harris continued talking]
Camilleri -- I think you've had your turn, you can come back
later.
[continuing off mike]
Can you put the mike up please.
Harris, ABC -- You said that you don't put billboards outside of
schools, but we found them outside of schools all over Jakarta and all
over other cities [in Indonesia]. We also found that you are
still using the Marlboro Man which was banned in this country because
it was considered to be inappropriate marketing to the children.
We also found that under the auspices of corporate social
responsibility, you are sponsoring schools under the name of Sampoerna
which is the brand name that 97% of Indonesians associate with
cigarettes. So, if a child at that school walks around with a
Sampoerna uniform, as they do, they are walking advertisements for
cigarettes.
Camilleri -- Please Mr. Harris, you don't believe what you are
saying.
Harris -- Yes, I do.
Camilleri -- Well, you are misinformed.
Harris -- well -- ... .
Camilleri -- I'm trying to, if you give me a chance.
Sampoerna Foundation was set up by the previous owners of Sampoerna,
the father of the person who sold the business to us. It is one
of the biggest and largest foundations in Indonesia, and its principle
priority has been education. We have given funds to the Sampoerna
Foundation, and we continue to do so. And they sponsor
universities and schools as you say, but they provide the money
and nothing else. So thank you.
Web Editor's
Note: Camilleri did not volunteer to change the name of the
foundation, and the uniforms, to something like, Indonesia!, without
PMI 2012 --
Shareholder Proposal 1 -- Independent
Board Chair, page 70 of the shareholder booklet.
John C. Liu, Jr., Comptroller, The City
of New York, on behalf of the Boards of Trustees of the New York City
Pension Funds and Retirement Systems ...
Whereas: the Board of Directors of
a company is meant to be an independent body, elected by, and
accountable to, shareholders;
Whereas: the Board of Directors is
charged by law with the duty, authority, and responsibility to
formulate and direct corporate policies that serve the interests of the
shareholders;
Whereas: the Chair of the Board of
Directors is charged with overseeing the Board, with a central role in
the Board's selection, independent oversight, and evaluation of the
company's chief executive officer (CEO);
Whereas: in order to avoid
conflicts-of-interest, and to ensure the independent oversight of the
CEO, the Chair of the Board of Directors should not be a current or
former employee of the company;
RESOLVED:
Shareholders request that
the Board of Directors adopt a policy to separate the positions of
Chair of the Board of Directors and CEO, and that the Chair of the
Board
of Directors shall be an independent director, who is not a former or
current employee of the company. The policy should allow for
departure under extraordinary circumstances, such as the unexpected
resignation of the Chair.
SUPPORTING STATEMENT
The recent economic and banking crisis
raises the issue of whether boards of directors are providing adequate
and effective oversight of management, and protecting the interests of
shareholders. The combination of the positions of Chair of the
Board of Directors and CEO at a number of the weakened companies has
given rise to deep concerns about whether the independent oversight of
such boards was compromised by the influence of the CEOs.
While the management of the company is
the purview of the CEO, the Board of Directors is obligated to
independently oversee the CEO and management, and to protect the
interests of the shareholders. Combining the positions of CEO and
Chair of the Board of Directors potentially undermines the independence
of the Board of Directors, and creates the environment for negative
impacts of conflicting interests. As companies move forward
beyond the crisis, boards of directors need to be more vigilant and
active in adopting, and ensuring compliance with, policies to avert
events of such magnitude and impact.
The existence
of the non-executive Chair
of the Board of Directors is the norm in many countries outside the
United States -- over 79% of large British companies and all German and
Dutch companies have split the positions (Millstein Center for
Corporate Governance), and support for this reform is growing in the
United States. Approximately 73% of directors on boards with an
independent chairperson believe that their companies benefited from the
split (Survey, 2008 Public US National Association of Corporate
Directors), More that 88% of senior financial executives believe
the positions should be separated (Grant Thornton, 2009 Survey).
The response from PMI in opposition
to the resolution on an Independent Board Chair, pages 71-72 of the 2012 shareholder
booklet.
The
Board recommends a
vote AGAINST this proposal.
This
proposal is identical to a proposal rejected by nearly 77% of the
votes cast by stockholders on the matter last year [2011].
The
primary responsibility of the Board of Directors is to foster the
long-term success of the Company. A key element in fulfilling
this responsibility is to determine periodically which person or
persons should serve as our Chairman and our CEO. In making this
determination, each director has a duty to exercise his or her good
faith business judgment of the best interests of the Company and its
stockholders. The Board believes it would be unwise to adopt an
inflexible policy that would inhibit its future ability to satisfy this
duty, particularly with respect to the critical function of succession
planning.
The
Board believes that it has strong governance provisions in place to
ensure independent oversight of the CEO. First, only one member
of management, our Chief Executive Officer, is a member of the
Board. Ten of the other eleven members meet the independence
requirements of the New York Stock Exchange and the Company's Corporate
Governance Guidelines. While we do not consider the remaining
non-management director, Mr. Slim to be independent, the Board believes
it benefits substantially from his entrepreneurial point of view and
unique perspective on the complexities of operating successfully in
both developed and emerging economies.
Second,
the
non-management
directors
annually
elect
one
independent
director
to
be
the
Presiding
Director.
The
presiding
Director
has
wide-ranging
responsibilities
and
authority,
as
detailed
on
page 8 of
this proxy statement.
Third,
various
Committees
of
the
Board
perform
oversight
functions
that
are
independent
of
management.
The
Audit
Committee,
the
Compensation
and
Leadership
Development
Committee
and
the
Nominating and Corporate
Governance Committee are each composed entirely of independent,
non-management directors. This means that oversight of critical
matters such as the integrity of the Company's financial statements,
executive compensation, including the compensation of the Chairman and
Chief Executive Officer, the nomination of directors and evaluation of
the Board and its Committees is entrusted to independent directors.
Fourth,
the
Board
and
each
of
its
Committees
have
unrestricted
access
to
management
and
the
authority
to
retain
independent
legal,
accounting
and
other
experts
and
consultants to advise the Board and the
Committees as they may deem appropriate.
Fifth,
non-management
directors
meet
in
executive
session
at
each
Board
meeting
without
any
members
of
management
being
present.
The
Board believes the current leadership structure, with Louis C.
Camilleri as Chairman and Chief Executive Officer, and Lucio A. Noto as
Presiding Director, best serves the interests of the Company and its
stockholders at this time. Mr. Camilleri has extensive and
detailed knowledge of the Company and the tobacco industry and an
incisive strategic view which, combined with his transparency and
open-mindedness when dealing with the Board, enable him to assist the
Board in focusing on the most important opportunities and risks facing
the Company. Mr. Noto plays an active role as Presiding Director
in providing independent Board leadership and helps ensure that the
Board's views are continually conveyed in unvarnished fashion to
management.
In
conclusion, the Board believes it should maintain its ability to
establish leadership structures in the future that reflect the Board's
judgment of the best interests of the Company and its stockholders
under then prevailing circumstances. The Board believes the
current structure has succeeded in optimizing long-term stockholder
value and notes that, during 2011, our total stockholder return was up
by a strong 39.8%, well ahead of our Compensation Survey Group (14.0%)
and the S&P 500 (2.1%) and ahead of our tobacco peer group
(30.2%). Indeed, in 2011, our total stockholder return and share
price appreciation outperformed those of each company in the Dow Jones
Industrial Average. Between March 28, 2008, the date we became a
publicly owned company, and December 31, 2011, we returned to our
stockholders approximately $37 billion, or approximately 27% of our
December 31, 2011 market capitalization, in the form of dividends and
share repurchases.
Therefore,
the
[PMI]
Board
urges
stockholders
to
vote
AGAINST
this
proposal.
PMI 2012 --
Shareholder Proposal 2 -- Create an Independent
Ethics
Committee, pages 72-73 of the 2012
shareholder booklet; followed by the opposition
statement of PMI.
Rev. Michael H.
Crosby, OFMCap., Corporate Responsibility Office,
Province of Saint Joseph of the Capuchin Order, claiming beneficial
ownership of at least $2,000 worth of shares, together with eight
co-proponents, submitted the proposal set forth below. ...
The Company is not
responsible for the content of the stockholder proposal, which is
printed below exactly as it was submitted.
WHEREAS PMI acknowledges it manufactures
a product which, if used as
intended, invariably leads to sickness and/or death for its users as
well as those directly impacted by its use.
The proponents of this resolution
acknowledge that, while using tobacco
(cigarettes, smokeless tobacco and other such products) may be legal,
their toxicity and detrimental effect on the health of human beings
demands greater ethical considerations when producing and marketing
such products, including challenging public policy efforts which, if
successful, may result in even greater use of such products by people
who become addicted to them in a way that further adds to their
difficulty in stopping the use of such products.
A projected 1,000,000,000 deaths are
expected this century throughout
the world unless effective tobacco control policies are adopted by
nations worldwide. A nation's right to protect the health of its
citizens takes precedence over any possible commercial argument
justifying the sale of such a lethal product for profit even if it is
legal.
The World Assembly of the World Health
Organization passed the Framework convention on Tobacco Control (FCTC)
in 2005 and recommended that nations adopt policies to reduce death and
disease from use of tobacco products. While PMI did not oppose
the adoption of the FCTC, it has subsequently filed complaints with the
World Trade Organization on FCTC policies adopted by independent
nations such as Uruguay and Australia and lobbied legislative bodies to
weaken laws implementing the FCTC. Tobacco interests helped
undermine Indonesian legislation restricting tobacco sales to children.
Recently PMI's marketing activities have
been highlighted in the media, including its all-pervasive marketing
campaigns in economically developing nations such as Indonesia and the
Philippines. Many times, it is alleged, these marketing efforts
include promotions attractive to minors, including music concerts.
One program, "Sex, Lies and Cigarettes"
portrays children as young as two years old smoking PMI's products, in
part, because their mothers were addicted to the same products while
pregnant with those children. One of them, titled "The Smoking
Baby", had to be taken with his mother to be treated for addiction (to
our Company's cigarettes) at a residential treatment center. For
other examples, like that featured by ABC's
20/20, entitled "From Age
2-7: Why Are Children Smoking in Indonesia", see http://abcnews.go.com/Health/age-children-smoking-indonesia/story?id=14464140#.TrmAdWDrX6E
and http://www.abs-cbnnews.com/business/02/25/10/philip-morris-and-its-philippine-saga
.
RESOLVED:
Shareholders request that
the Board of Directors create an independent ethics committee to review
any and all future marketing efforts of PMI anywhere in the world to
ensure shareholders that all of its tobacco products and promotion do
not undermine the efforts of sovereign nations to adopt laws and
practices (based on the FCTC) meant to keep our products form
illiterate people or children.
SUPPORTING STATEMENT
While tobacco companies have created
"corporate responsibility" departments, the unethical practices noted
above seem to continue unabated. Thus the need for an independent
group to ensure PMI's various stakeholders that our lethal products are
not doing to unsuspecting people more damage than is already being done.
The
response
from
PMI
in opposition
to the resolution on an Independent Ethics Committee, pages 73-74 of the 2012 shareholder
booklet.
The
Board recommends a
vote AGAINST this proposal.
We believe that our transparent engagement with governments is
appropriate and consistent with principles of better regulation and
that our participation in the regulatory process does not interfere
with the development of effective, evidence-based public health
policy. On the contrary, we have provided sound evidence that we
believe has helped decision makers. Moreover, our dialogue with
regulators is guided by the desire of many other stakeholders to have a
constructive evidence-based dialogue.
Most relevantly, we have made clear that the sale and marketing of
cigarettes -- and all other tobacco products -- should be directed only
to adult smokers. This principle should be a foundation of laws
and regulations governing the marketing and sale of tobacco products,
and it is ingrained in the principles and policies governing PMI's
marketing and sales practices. Further, our marketing, packaging
and sales initiatives are reviewed and approved by the relevant
internal departments, including the Legal, Brand Building and Corporate
Affairs functions. Our commitment is additionally enhanced by
annual training provided to all employees and third parties
substantially involved in marketing and sales on our policies and
procedures.
While we do not agree that marketing causes people to smoke, we have
been a strong advocate for regulations that restrict the advertising
and promotion of tobacco products, including bans in media such as
television, radio and billboards. In our view, regulation can
strike the right balance between limiting tobacco product marketing and
maintaining the ability of tobacco companies to communicate with adult
smokers about available products, ensuring that products are
appropriately regulated, and requiring that manufacturers provide
consumers with adequate warnings about the health effects of tobacco
products, among other measures. We have supported such
regulations, including total bans on broadcast media such as television
and radio, bans on billboard advertising, bans on advertising in print
media, restrictions on smoking in many public venues, and requirements
to place health warnings on all cigarette packs and advertisements.
However, we have been very clear that we oppose point of sale display
bans, plain (generic) packaging, a ban on all forms of communications
to adult smokers, and measures to ban all ingredients added to tobacco
products. These recommendations are not based on sound evidence
of a public health benefit and have been shown to and are likely to
lead to adverse consequences such as an increase in illicit trade and
low-price cigarettes which undermine public health objectives.
In summary, we believe that existing procedures established and
enforced by the Company to ensure accountability and compliance with
PMI's marketing policies and legal obligations are fully sufficient and
consistent with our commitment to marketing our products responsibly.
Accordingly, the Company does not believe the proponents' request is
warranted.
Therefore, the [PMI] Board urges stockholders to vote AGAINST this
proposal.
Comments
by
Michael
Crosby
in
moving
the
Shareholder
proposal
on
an
Independent
Ethics
Committee.
Transcribed
from
the
audio
web cast at the PMI web site:
Camilleri: We will now
move on
...
Good morning, Father.
Michael Crosby : Good morning, Mr. Camilleri, and board,
and shareholders. My name
is Michael Crosby. I am a brother in the Capuchin Franciscan
Province of St. Joseph based in Detroit, and I am based in Milwaukee.
And I am here to move adoption of our shareholder proposal on [pages]
72 and 73.
I'd like to speak first of all, thanking the company for movement it
made in response to our shareholder resolutions on green tobacco
sickness and farm workers and the movement being made there to get a
multi-stakeholder meeting that would address problems of human rights
with farm workers, and I see that as a positive step.
However, given what we have heard today, and talk about blindness, I
can't help but look at the fact that even though this company may be
against what is going on in Uruguay [lawsuit filed by PMI]. When
I saw Marlboro up there, [slide of the tobacco pack with 80% of the
pack showing a diseased mouth and 20% showing the name Marlboro] and
80% of it with the diseased mouth, having taken marketing myself, my
first reaction was, Marlboro brings you this. I think it's very
important as we look at the product we are making, that Marlboro is
bringing death. Everyone of us having shares, including us, but
we're trying to engage the company. We're trying to bring about
fairness to the people who are illiterate, and children, and for us to
sit here and clap when people are trying to bring about health to
people, I just can't understand the motivation, and it's deeply
troubling for me.
There is a disconnect, there is a deep disconnect between the fact that
the product we are making is creating death for people, and we clap at
the fact that we are the best one in the world bringing death to
people. We are making our money on this, at least we should
refrain. But when somebody gets up and tries to speak to the
bottom issue of people's health which is a human right, and we all know
that our product is creating death for one in every three users.
it's something that is a moral issue for us.
The bottom line may be profit, but there is a deeper bottom line, and
that's the moral bottom line.
I would urge you to support our resolution because all we are asking
for, all we are asking for, is that this company not interfere with
governments who are trying to preserve the health of their people,
especially the illiterate ones and the children, and when the company
is against this, you see there is this disconnect.
So I would respectfully ask you to examine your consciences along with
your pocketbook, and support this resolution. Thank you.
[Applause from audience which includes shareholders who are also
activists.]
Camilleri: Thank you. ...
Comments
by
Catherine
Rowan,
Trinity
Health,
seconding
and
supporting
the
Independent
Ethics
Committee
shareholder
resolution.
My name is Cathy Rowan, representing
the shareholder Trinity Health, speaking in support of Shareholder
Proposal 2.
While PMI states its marketing is about communicating with adult
smokers about available products, it is difficult to understand how a
recent ad campaign in Indonesia meets this criteria. I have
learned that last year, during the month of Ramadan, Sampoerna posted
billboards showing two young men standing on the door of a moving bus,
holding onto their friend who was getting left behind. There was
a caption on the billboard, translated in English as, "It is better to
die than to leave a friend behind", and next to it was the Sampoerna
logo with a tagline translated as "A fun friend".
Are tobacco companies in Indonesia, including PMI, making extra efforts
to promote their products during and at the end of Ramadan, which is a
heavy travel time in that country, to encourage people to resume
smoking? An Independent Ethics Committee is needed in order to
ask this kind of questions -- because we all know that using cigarettes
finds many people dying in a way that leaves many friends behind.
An ethics committee set up by the board would be attentive to health
challenges such as the changing global patterns in tobacco use, with
the burden of the preventable adult mortality caused by tobacco now
shifting to people in developing countries, as well as the impact on
children in poor households where income to purchase food is diverted
to buying tobacco products.
I ask you to please support the strengthening of PMI's policies by
voting for this proposal.
Thank you.
Camilleri:
Thank
you
Mrs.
Rowan.
...
I do want to mention one thing. Mrs. Rowan, you mentioned the
specific poster in Indonesia, which has been widely publicized by the
anti-smoking community. The translation that was given to you and
others from Bahasa into English is completely wrong. So, please
look at the original language, and get it translated by someone who
speaks Bahasa, and you will see it has nothing to do with what you just
said.
[Small applause from the audience.]
Web Editor's
Note: Camilleri did not give her the translation, but said she
should find someone who speaks Bahasa to translate the poster.
Was he telling the truth, as in, would a tobacco CEO actually lie?, is
this the age-old tobacco company casting of doubt on the truth game, or
what?
ALTRIA GROUP,
INC.
Altria Group, Inc. -- May
17, 2012.
There is
no-smoking allowed in the
entire building of the Richmond (Va) Convention Center where the
meeting was held.
Altria
includes
the following companies:
Philip Morris USA Inc.
U.S.
Smokeless Tobacco Company LLC
John
Middleton Co. [large cigars, pipe tobacco]
Ste.
Michelle Wine Estates Ltd.
Philip
Morris
Capital
Corporation
Altria
Group
Distribution
Company
Altria
client
Services
Inc.
Altria
holds
a
continuing
economic
and
voting
interest
in
SABMiller
pic,
brewers.
The CEO of
Altria Group, Inc. was,
until the end of the meeting, Michael
E.
Szymanczyk, who will not remain on the Board.
The incoming CEO is Martin J.
Barrington, formerly Vice Chairman; having joined Altria in 1993
and appointed to the Board in January 2012; before Altria, he was a
lawyer in government and private sectors; serves on the boards of the
Virginia Museum of Fine Arts, College of Saint Rose, and the Points of
Light Institute; was a former Commissioner for the Virginia Port
Authority.
Other Board Members as listed in the
company shareholder booklet are as
follows:
Elizabeth E. Bailey
Professor Emerita
of Business and Public Policy of the Wharton School of the University
of Pennsylvania;
Gerald L. Baliles
A former Governor
of Virginia with a background at other tobacco companies; Director of
University of Virginia's Miller Center of Public Affairs; serves on
boards of Norfolk Southern, Virginia Foundation for Community College
Education, Center for the Study of the Presidency; formerly on boards
of Nature Conservancy in Virginia, PBS, Shenandoah Life Insurance.
John T. Casteen III
President
Emeritus of University of Virginia; former Secretary of Education in
Virginia; a director of Strayer University, Chesapeake Bay Foundation,
Sage Publications, and others.
Dinyar S. Devitre
Special Advisor
General Atlantic Partners in Connecticut; retired from Senior Vice
President and Chief Financial Officer of Altria Group; a director of
Western Union, SABMiller pic; formerly a director of Kraft Foods; on
boards of Pratham USA, Brooklyn Academy of Music.
Thomas F. Farrell II
Chairman,
President and CEO Dominion Resources, Inc.; head of two subsidiaries of
Dominion Resources; a director of the Institute Nuclear Power
Operations.
Thomas W. Jones
Senior Partner
TWJ Capital LLC an investment firm in Connecticut; formerly CEO of
Global Investment Management with Citigroup; formerly CEO and Vice
Chairman of TIAA-CREF; trustee emeritus of Cornell University, a
trustee of Howard University.
W. Leo Kiely III
Retired CEO of
MillerCoors in Colorado; formerly held executive positions with
Frito-Lay a subsidiary of PepsiCo, and Ventura Coastal Corporation, a
division of Seven Up; on boards of Medpro Safety Products, Denver
Center for the Performing Arts, Helen G. Bonfils Foundation.
Kathryn B. McQuade
Executive Vice
President and Chief Financial Officer of Canadian Pacific Railway in
Canada; formerly an Executive Vice President at Norfolk Southern; on
the board of trustees of The College of William & Mary Foundation.
George Munoz
Principal of
Munoz Investment Banking Group in Washington DC; partner in the Chicago
based law firm of Tobin & Munoz; formerly Chief Financial Officer
and Assistant Secretary of the US Treasury Department; on the boards of
Marriott International, Anixter International; on board of trustees of
the National Geographic Society.
Nabil Y. Sakkab
Retired Senior
Vice President, Corporate Research and Development of The Procter &
Gamble Company in Ohio; on board of directors of Givaudan SA and
Deinove.
Report entered June 7, 2012, on the May
17, 2012
meeting of Altria Group, Inc.,
by Edward
L.
Sweda,
Jr.,
entitled:
Altria's Annual
Shareholders Meeting in Richmond, Virginia: Retirement provides
no change in the company's conduct.
By Edward L. Sweda, Jr.
In January 2012, Altria Group, Inc.
announced that CEO Michael E. Szymanczyk would retire after the
completion of the company’s Annual Shareholders Meeting in Richmond,
Virginia on May 17. Mr. Szymancyk worked for the company in
various capacities for 23 years. Michael J. Barrington was named
to succeed him as Chairman and CEO, while Dave Beran was selected to
take over as President and Chief Operating Officer .
While Mr. Szymancyk can take advantage of
generous compensation – a pay package valued at $10.2 million
for fiscal year 2011 for his work as the CEO of America’s largest
cigarette manufacturer, there are many others who are not in a position
to enjoy retirement. These include the hundreds of
thousands of Americans who annually die prematurely due to
smoking-caused diseases, as well as from exposure to secondhand smoke.
As usual, the biggest portion of time at
the Annual Shareholders Meeting was devoted to the CEO’s business
report on the prior year. During this presentation, Szymanczyk
said that Altria had “successfully managed” the external challenges of
litigation.
However, during the question-and-answer
session, this author noted that, in late March 2012, the U.S. Supreme
Court had declined to consider Altria’s appeal in the Campbell
case and Reynolds American’s appeal in the Martin case. In its petition for
certiorari filed in December 2011, the attorneys for Reynolds American
alleged that “in their conduct of Engle Progeny litigation, the Florida
state courts are engaged in serial due process violations that threaten
the defendants [including Altria] with literally billions of dollars of
liability.” The attorneys also warned that if the U.S. Supreme
Court did not provide “prompt review,” then “the massive liability
imposed on the Engle defendants – which currently stands at over $375
million in adverse judgments – will likewise steadily increase as Engle
progeny trials continue with no end in sight.” So, this doomsday
scenario outlined by tobacco company attorneys is on track to occur,
thanks to the U.S. Supreme Court’s refusal to hear the appeal.
Therefore, I asked Mr. Szymanczyk: “Why shouldn’t investors and
shareholders rely on what tobacco company lawyers said to the
U.S. Supreme Court, rather than what you are telling us today?”
In response, Mr. Szymanczyk referred the
audience (which included people listening to a webcast of the meeting)
to the company’s latest 10-Q report, which contains 32 pages of
information on tobacco litigation.
Returning to the theme of retirement,
Anne Morrow Donley, a Virginia shareholder, addressed CEO Szymanczyk
directly. “With your retirement, I’m sure you look to your
legacy. Certainly you and the company have a passion for
success. I’m not sure about satisfying your customers’ and their
preferences unless they all have a death wish,” she said. “One of
every two of your tobacco customers dies from using your tobacco
products, often from a debilitating illness. At some point
in the future, you and the company may indeed be charged with crimes
against humanity – I look forward to that,” she concluded.
After the question-and-answer session,
the next order of business was the consideration of a shareholder
resolution, submitted by the Province of St. Joseph of the Capuchin
Order in Milwaukee. The proposal, which dealt with Altria’s
lobbying activities, called for on the Board of Directors to prepare a
report that would disclose, on an annual basis:
- “Company policy and procedures governing the lobbying of
legislators and regulators, including that done on our company’s behalf
by trade associations. The disclosure should include both direct
and indirect lobbying and grassroots lobbying communications.
- A listing of payments (both direct and indirect, including
payments to trade associations) used for direct lobbying as well as
grassroots lobbying communications, including the amount of the payment
and the recipient.
- Membership in and payments to any tax-exempt organization that
writes and endorses model legislation.
- Description of the decision making process and oversight by the
management and Board for
- Direct and indirect lobbying contribution or expenditure; and
- Payment for grassroots lobbying expenditure.”
The key goal of the resolution is
transparency. Father Michael Crosby, a Capuchin Franciscan,
endorsed the proposal, noting that his order and “eight other members
of the Interfaith Center for Corporate Responsibility have submitted
the resolution that has received the support of one of the biggest
institutional advisor groups in the United States. ISS, Institutional
Shareholder Services. When they analyzed what we are
asking for, and what the company’s response is, they said that it was
not adequate enough to support the company, so they are basically
supporting us.”
Father Crosby continued, contending that
Altria has a “culture of connivance.” Citing the election battle
in California over Proposition 29,
a
proposition
would, for the first time in 14 years, raise the state
cigarette excise tax by $1 per pack to help fund cancer
research. Father Crosby noted that Altria “has contributed
two thirds of the $40 million trying to undermine” support for the
proposition. On the “main web site
of this group in California that is against” Proposition 29, it
says it is supported by small business. “There is no mention that
two thirds of all the money going into this is from a big business
like” Altria, Father Crosby said. [Initial reports on the June 5,
2012 vote in California show a very narrow defeat for the proposition,
by a margin of 50.8% against versus 49.2% in favor].
Father Crosby also condemned Altria’s
support for the American Legislative
Exchange Council, noting that the company has a seat on ALEC’s
board of directors. “It isn’t democracy. It’s corpocracy,
and it’s hypocrisy when there is this connivance,” Father Crosby told
the audience.
In seconding the proposal, this author
noted that “this modest shareholder proposal comes at a time of
unprecedented public concern and pushback about the excessively
pervasive and powerful influence that corporations have in the American
political system. In the wake of the January 2010 U.S. Supreme
Court decision in the Citizens United case,… in which
right-wing judicial activism has transformed the landscape of the
American electoral process, certainly this resolution addresses a
subject of utmost importance.”
I also noted that Altria had donated
$50,000 to ALEC’s annual meeting for drafting legislation for Florida
and other states that adopted the so-called “Stand Your Ground”
legislation which has garnered international attention after the
February 2012 fatal shooting of an unarmed 17-year-old, Trayvon Martin.
“ Altria’s association with ALEC should have been disclosed to
shareholders” long before now, I concluded.
In its opposition to the proposal, Altria
claimed that it “provides extensive information on its website
describing its public policy activities” and that the “additional
report sought by this proposal is not necessary and would not provide
meaningful additional insight into the Company’s activities in this
area.”
The proposal was defeated with a
preliminary result of 20.5% of shares in favor, with 79.5% of shares
opposed.
So, after the meeting, Michael Szymanczyk
did indeed retire as Altria’s CEO. His successor is expected to
proceed with business as usual – as deadly as that business will be for
untold millions of people.
EXCERPTS from the Associated Press, in The Richmond Times-Dispatch, April 5, 2012; "Altria's Szymanczyk made
$10.2 million last year".
Outgoing Altria Group Inc. CEO Michael
Szymanczyk received a pay package valued at $10.2 million for
fiscal 2011, about half of what he made in 2010.
That's according to an
Associated Press analysis of a regulatory filing the cigarette maker
made today.
Most of the decrease was
due to the 2010 payout of a long-term performance-based bonus of $10.7
million. Szymanczyk's salary was $1.34 million, and he received a $3.25
million performance-based bonus. The value of his stock awards rose 3
percent to $5.1 million. ...
The AP's calculation counts
salary, bonuses, perks, stock and options awarded to the executive
during the year.
QUESTION and ANSWER
SESSION, Altria Group, Inc.
--
This occurred prior to the presentation of the one shareholder
resolution.
-- CEO Michael E.
Szymanczyk announced 30 minutes for the entire Q&A segment, with
two minutes allowed for each speaker, with a timer at the
front marking the time with a green, yellow, and red light.
Altria provided an audio limited time web cast, from which this has
been excerpted.
As usual, a representative from the local Virginia
stockbroker, Davenport, had a time consuming question which could
easily have been asked in private, and which the CEO had as usual
already addressed in the opening business remarks, "What is your
confidence in getting new products to the market to grow Altria?"
The next question was from Michael Crosby.
Michael Crosby:
Hello Mr. Szymanczyk and shareholders. My name
is Michael Crosby. I am a Capuchin Franciscan Brother from
Milwaukee. And we're going to have a shareholder resolution that
we're presenting. But I want to make a comment, and then a
question at the end of my comment.
Last year different tobacco companies began the process of coming
together to address problems in the fields with tobacco farm
workers. We rely on the farm workers to get product, and as a
result of looking and acknowledging the problems in the fields with
farm workers, a multi-stakeholder meeting was in the process of
evolving
since last year's shareholders
meetings at the big three
U.S. tobacco companies, in fact even Alliance One
[International] and Universal [Corporation]
were involved in the effort to bring about some way of resolving the
problems there. And Altria was in there, and ... others in the
company were very cooperative in trying to address this issue.
Last month there was the beginning
meeting to bring together the industry, the farmers and their
associations, the farm workers, and their representatives.
I wasn't there because I had other commitments, but our rep. from the
Interfaith Center on Corporate Responsibility said it is moving very
well toward some kind of way of addressing it.
And you just alluded a little bit to your corporate responsibility in
that area, Mr. Szymanczyk, and I just thought, given that, could you
elaborate just a little more on how you see this effort going?
MICHAEL
E.
SZYMANCZYK,
CEO: Well, welcome, Father Crosby, and
thank you very much for your question.
I might start by acknowledging the
good work that you have done in this particular area in stimulating
people looking at it closely and getting organized to try to improve
agricultural practices on the farm as it relates to tobacco growing.
I did allude to some of the work that we've done -- the development of
our own good agricultural practices approach for the growers that we
contract with and for the folks overseas that we buy tobacco through, as well as monitoring systems that we put
in place, some of which came about through work with you, and
the continued efforts that you spoke of that continue to evolve going
forward into the future.
There is in fact quite a bit of information on this subject and what
we've done and what progress we've made, score cards as what we've
looked at what farms are doing, on the web site. So I would offer
this up to shareholders as an approach in this important area. So
thanks very much again for your leadership in this area.
The next question was from Edward L. Sweda, Jr.
Edward
L. Sweda Jr.: Good morning, I am Edward Sweda, a
shareholder from Massachusetts.
My question is, I note both in the annual report and earlier this
morning you said regarding tobacco litigation, that Altria
"successfully managed" the external challenges of litigation in 2011.
Now, on March 26 of this year [2012], the US Supreme Court declined to
consider Altria's appeal in the Campbell case, that's one of the Engle
progeny verdicts in Florida, and also declined to hear Reynolds
American's appeal in the Martin case.
Now, in its petition for certiorari that was filed in December,
Reynolds American's attorneys claimed that "in their conduct of the
Engle progeny litigation, the Florida state courts are engaged in
serial due process violation that threatened the defendants with
literally billions of dollars of liability." And those attorneys
also warned that if the Supreme Court did not provide "prompt review"
of these verdicts, then "the massive liability imposed on the Engle
defendants which currently stands at over $375 million in adverse
judgments, will likewise steadily increase as Engle progeny trials
continue with no end in sight".
And as I said, less than two months ago, the Supreme Court in fact
decided not to consider the tobacco defendant' appeals in these
cases. So my question is regarding tobacco litigation, especially
the cases in Florida, why shouldn't investors and shareholders rely on
what the tobacco company lawyers say directly to the US Supreme Court
rather than what you are telling us today?
MICHAEL
E.
SZYMANCZYK,
CEO: Well, I think that what
shareholders should rely on is the disclosure that's in the 10Q, and
there's a very complete and detailed disclosure in the 10Q related to
Engle and related to the other litigation that the company is engaged
in. The Engle trial itself is a very complex trial, it has lots
of pieces to it, you talked about a couple. Yesterday the
Florida Supreme Court agreed to hear a due process appeal in one of the
Engle cases.
So, it continues to evolve. We continue to feel what we are
disclosing
about this is complete and provides shareholders with a good
understanding of what is a very complex piece of litigation. And,
I
would direct you and others to thoroughly read the disclosures that are
in the 10Q which are updated regularly.
So thanks very much for being here, and thanks very much for raising
what is I think is an important issue for the company. It goes
without saying that litigation remains a challenging risk for this
company. And so it's an area that is important for shareholders
to understand. Thank you.
The next question was from a representative of SHARE,
a Latin American citizens group, thanking Altria for its help to the
communities, and complimenting them on having George Munoz on the Board
of Directors.
The next question was
from Anne Morrow Donley.
Anne
Morrow Donley: Hi there, Mike. I am Anne Morrow
Donley, of Virginia, a shareholder.
With your retirement, I'm sure you look to your legacy. Certainly
you and the company have a "passion for success". I'm not sure
about "satisfying your customers and their preferences" unless they all
have a death wish.
One of every two of your tobacco customers dies from using your tobacco
products often from a debilitating illness. At some point in the
future you and the company may indeed be charged with "
crimes
against
humanity". I look forward to that.
As a woman I'm especially concerned about your targeting of women in
your lobbying -- their health, their reproductive choices. You,
yourself, your wife, and many of your executives of Altria have donated
to national figures and to state political figures who are
anti-choice.
And so, my question is whether you yourself are anti-choice or
pro-choice for a woman's right to choose her own health care and her
own reproductive choices, and whether you, your wife, or Altria have
personally contributed to
AUL, Americans United
for Life. They are the ones as you may or may not know who
wrote the ultrasound bills, the personhood bills, the very invasive and
insulting bills that have swept the nation. So are you in support
of Americans United for Life financially, and how do you stand on the
issue of choice and pro-choice as relates to women?
MICHAEL E. SZYMANCZYK, CEO:
Thanks
very
much
for
your
question.
If
you
look
at
the
company
web
site,
and you look at issues where the company is focused on
particular subjects, you will find that this is not one of them.
So this is not an issue we have determined that we ought to be working
on relative to our shareholders interests. And so we don't.
Relative to people's personal beliefs in this particular area, I don't
think that is relevant at a shareholders meeting at Altria. But
thanks for being here and thanks for your question.
Web Editor's
Footnote:
There are two references at the end of this web page regarding Amos Hausner,
attorney in Israel, and advocate for health, and son of Gideon Hausner
who was the Chief Prosecutor of the Eichmann Trial.
First, Amos Hausner
spoke movingly at a
United Nations event, April 23, 2012, with the transcription
near the end of this web page, from a Round-table
discussion
in
video
report
(at
about 00:34:03) on “The trial of Adolf
Eichmann: 50 years later”. He referred in his remarks to tobacco
companies having committed, and continuing to commit, crimes against
humanity, as can be inferred from their knowledge of the dire
unavoidable consequences to millions of humans who use cigarettes
exactly as intended by the said companies.
Second, the subject was again mentioned at the first Israeli Conference
on Tobacco or Health, an article from the "Jerusalem Post"
is excerpted here.
The
next
question
was
from
Jean
Cameron.
Jean Cameron: I'd like
to know if Altria has built into its business model the contingencies
for dealing with this
Obamacare
if it is passed by the Supreme Court.
MICHAEL E. SZYMANCZYK, CEO:
Well,
I
think
that
we
all
in
corporate
America
understand
what's
been
passed,
and
so our approach to that is to understand how that evolves
or regulations that have to come about related to that, so we follow
that so that we can be prepared to act appropriately depending on what
happens. So I think that's going to continue to unfold over time
and we're paying close attention to it. As it stands now that is
the law of the land, and so we'll be prepared to deal with that in the
appropriate way.
Thanks very much for your question.
There were no more questioners.
Shareholder
Proposal presented at the Altria 2012
meeting
The CEO transitioned to the shareholder proposal, noting it would be
presented, and the company urges shareholders to vote against it, and
to read the proposal and Altria's opposition response. Four
minutes would be
allowed for the proponent to present the proposal, and two minutes each
for two persons to second and support the resolution, with a total of
no more than eight minutes devoted to this segment.
Comments by
Michael Crosby in
moving
the Shareholder proposal on Disclosure
of
Lobbying
Policies
and
Practices.
Excerpts transcribed from the audio web cast at the Altria Group web
site before it ceased working.
"Michael Crosby
again, with the Capuchin
Franciscans. We and eight other members of the Interfaith Center
for Corporate Responsibility are presenting this. It has received
the support of one of the biggest shareholder services, ISS, Institutional Shareholder
Services. When they analyzed what we are asking for, and the
company's response, they said that was not enough, so they are
basically supporting us."
... "The company has done a good job on
articulating its political contributions, but on lobbying, it's a whole
other issue." ...
It needs to get some sunshine. The
company has a culture of connivance. ...
"This company on proposition 29 in
California has contributed two thirds of the $40 million dollars trying
to undermine" this. There is all sorts of "connivance on why the
company is against it. But on the main web site of this group in
California that is against" proposition 29, "it says it is" supported
by small businesses. "There is no mention that two thirds of all
the money going into this is from a big business like Altria."
...
In the Altria report, "The American Legislative Exchange Council (ALEC)
has
one line listed among the basic
40 lines per page of 21 pages of contributions. What ALEC
has done is equated with what St. Gertrudes in Richmond has done.
There is no disclosure."
... "So
how in the world can we talk about how we are providing equal access
when the company is involved in these behind the scenes" efforts.
"It isn't democracy. It's
corpacracy, and it's hypocrisy when there is this connivance."
Where is integrity?
"We have
had dialogue with the company" over this matter of ALEC.
"Originally, American Legislative Exchange Council was listed.
Then after the dialogue, it disappeared. Then, this morning, I
looked, and it was back up again. This isn't transparency.
We are asking for transparency. We don't know how the legislation
is made, but the company is behind the scenes working with" ALEC.
Altria is on the corporate board of directors of ALEC.
MICROPHONE TURNED OFF
MICHAEL E. SZYMANCZYK, CEO:
Thank
you,
Father
Crosby.
Michael Crosby continues to speak, no microphone sound.
MICHAEL E. SZYMANCZYK, CEO:
Thank
you.
Comments by Edward L. Sweda,
Jr. in support of this proposal on Disclosure of Lobbying Policies and
Practices.
Excerpts transcribed
from the audio web cast at the Altria Group web site before it ceased
working.
"Edward Sweda. This modest shareholder proposal comes at a
time" of enormous contributions from corporations in the American
political system.
"In the wake of the January 2010 U.S. Supreme Court decision in the Citizens United
case, which is the subject of a very comprehensive article" ... in The
New Yorker ... "in which right wing judicial activism has transformed
the landscape of the American electoral process."
"In addition to the U.S. Supreme Court opening the flood gates to
contributions by corporations and unions" ... there are the
"allegations regarding ALEC.
"Altria donated $50,000 to their
[ALEC] annual meeting for its drafting legislation for Florida and
other states, the so-called 'stand your ground' legislation" ... which has been discussed
"around the world in the aftermath of the unarmed killing of a 17 year
old". ...
With Proposition 29 in California,
"the $40 million, according to news
articles, that's the greatest amount given" except for Mitt Romney's
Restore Our Future SuperPAC."
"End by saying that Altria's association with ALEC should have been
disclosed to shareholders,"
MICROPHONE TURNED OFF
MICHAEL E. SZYMANCZYK, CEO:
Thank
you.
Comments by Anne Morrow Donley
in support of this proposal
on
Disclosure of Lobbying Policies
and
Practices.
Excerpts transcribed
from the audio web cast at the Altria Group web site before it ceased
working.
Anne Morrow Donley, again, a
shareholder from Virginia in support of this resolution, and also
seconding it. Certainly, in your lobbying, as the
woman
mentioned
Obamacare," ...
... "this
company has been documented
as fighting against the health
care proposal as outlined by Hillary Clinton, fought against the
current
health care public option, and now that the law having been passed,
this
company is both working to have it repealed at the same time as
accepting the law's appropriations. This was revealed in a survey
of
the US Chamber of Commerce Board of Directors, which does include
Altria."
"Looking at the fact that this company is
lobbying strongly to not have
the tax raised on those like yourself who are in the 1 percent" ... I
note that "Carlos Slim, who was once on your board of directors and now
is on that of PMI, has been recognized as one of the wealthiest people
in the world. So certainly you are protecting their rights not
the
rights of other people.
And also this company has been noted as one of the companies, despite
your presentation,
against the
science of climate change."
The proposal is important and modest.
"We know that it is the profit margin that is important.
We know that you do whatever would advance the company.
It should advance the company to support this resolution."
MICHAEL
E. SZYMANCZYK, CEO: "Thank you, Anne.
And let me just make a comment on these
last couple of statements. These issues, Father Crosby raised
one, and
Ms. Donley raised another one.
Issues like Women's rights, issues like
health care, government involvement in health care, tax reform, these
are all complex issues."
"The company when it works on legislative issues tries to stay on" ...
topics which impact ... the "operation of the company." ... "These
larger societal issues have to be determined by society."
But, I "appreciate your raising these topics. I can't tell you
that
all you have said is accurate. They are important issues" ... and
"the
country has to decide which direction it wants" ... to follow.
Shareholder Proposal
presented at the Altria Group shareholder meeting,
Disclosure of Lobbying Policies and
Practices, pages 75-76 of the proxy booklet
This is here followed by the text of the opposition
statement of Altria
Group, in the proxy booklet pages 76-77.
The vote was approximately 20.5% for the resolution, 75.9% against.
[Rev. Michael H.
Crosby, OFMCap., Corporate Responsibility Office,] The
Province of Saint Joseph of the Capuchin Order ... claiming beneficial
ownership of common stock with a market value of $2,000, together with
eight
co-proponents, submitted the proposal set forth below. ... The Company is not
responsible for the content of the stockholder proposal, which is
printed below exactly as it was submitted.
Whereas, businesses, like individuals,
have a recognized legal right to express opinions to legislators and
regulators on public policy matters.
It is important that our company's
lobbying positions and processes to influence public policy, are
transparent. Public opinion is skeptical of corporate influence
on Congress, and public policy and questionable lobbying activity may
pose risks to our company's reputation when controversial positions are
embraced. This is especially important since the brunt of our
business involves a product directly impacting health care in our
nation. Hence, we believe full disclosure of Altria's policies,
procedures and oversight mechanisms is warranted.
Resolved, Altria shareholders request the
Board authorize the preparation of a report, updated annually,
disclosing:
1. Company
policy and procedures governing the lobbying of legislators and
regulators, including that done on our company's behalf by trade
associations. The disclosure should include both direct and
indirect lobbying and grassroots lobbying communications.
2. A listing of payments (both
direct and indirect, including payments to trade associations) used for
direct lobbying as well as grassroots lobbying communications,
including the amount of the payment and the recipient.
3. Membership in and payments to
any tax-exempt organization that writes and endorses model legislation.
4. Description of the decision
making process and oversight by the management and Board for
a. direct and indirect lobbying
contribution or expenditure; and
b. payment for grassroots lobbying
expenditure.
For purposes of this proposal, a
"grassroots lobbying communication" is a communication directed to the
general public that (a) refers to specific legislation, (b) reflects a
view on the legislation and (c) encourages the recipient of the
communication to take action with respect to the legislation.
Both "direct and indirect lobbying" and
"grassroots lobbying communications" include efforts at local, state
and federal levels.
The report shall be presented to the
audit Committee of the Board or other relevant oversight committees of
the Board and posted on Altria's website.
SUPPORTING STATEMENT
As shareholders, we encourage
transparency and accountability on the use of staff time and corporate
funds to influence legislation and regulation both directly and
indirectly as well as grassroots lobbying initiatives. We believe
such disclosure is in shareholder's best interests. Absent a
system of accountability, company assets could be used for policy
objectives contrary to a company's long-term interests posing risks to
the company and shareholders.
Altria spent approximately $23.1 million
in 2009 and 2010 on direct federal lobbying activities, according to
disclosure reports (U.S. Senate
Office of Public Records). This figure may not include
grassroots lobbying to directly influence legislation by mobilizing
public support or opposition. Also, not all states require
disclosure of lobbying expenditures to influence legislation or
regulation. And Altria does not disclose contributions to
tax-exempt organizations that write and endorse model legislation, such
as Altria's $50,000 contribution to ALEC's [American Legislative
Exchange Council] annual meeting (http://thinkprogress.org/politics/2011/08/05/288823/alec-exposed-corporations-funding/).
Such expenditures and contributions can
potentially involved the company in controversies posing reputational
risks.
The
response
from
Altria
Group Inc. in opposition to the proposal on Disclosure of Lobbying
Policies and Practices, in the proxy booklet pages 76-77.
The
Board recommends a
vote AGAINST this proposal.
Altria and its companies believe that participation in the political,
legislative, and regulatory processes -- at all levels of government --
is vital to our business. As such, we actively advocate on public
policy issues relevant to our companies and are committed to doing so
in full compliance with applicable laws. In recognition of the
interest of shareholders and other stakeholders in information about
these activities, the company provides extensive information on its
website describing its public policy activities. There also
exists a significant amount of information that is readily available
from other public sources concerning these activities. The
additional report sought by this proposal is not necessary and would
not provide meaningful additional insight into the company's activities
in this area.
The Company voluntarily provides a great deal of information about its
public policy efforts on its website. For several years, the
website has included an easily-accessible "Legislative Issues Book,"
which provides detailed information regarding the positions of Altria
and its companies on a variety of public policy issues.
Additionally, the website identifies the specific public policy
organizations (including trade associations) that have received
contributions from the Company or its subsidiaries. Since 2007,
the Company has disclosed information regarding political contributions
made by each of its companies; since 2012, the Company has provided
various details concerning its political compliance program.
These disclosures have been favorably reviewed by third-party
organizations. For example, in 2011, Altria was recognized by
both the center for Political Accountability-Zicklin Index of Corporate
Political Disclosure and Accountability and the Baruch Index of
Corporate Political Disclosure as being a "leader" in publicly
disclosing its political activities.
The Company has a robust governance and compliance framework for its
public policy activities. The Nominating Corporate Governance and
asocial Responsibility Committee of the Board of Directors has
oversight responsibility for the Company's public policy
activities. Additionally, the company has developed and maintains
a comprehensive compliance and integrity program regarding all of its
activities, including its public policy and advocacy program. The
Altria code of Conduct, available on the Company website, sets forth
the general requirements for the political activities of Altria and its
companies, and these requirements are supported by four specific
compliance policies governing public policy activity, including
lobbying. Pursuant to these policies, we file detailed reports
disclosing our lobbying activities at the federal, state, and local
level; most of these reports are readily available from public sources.
Finally, the Board opposes this resolution because many aspects of the
proposal are vague or unworkable and may create confusion. For
example, the definition of lobbying and the payments that would be
considered lobbying-related vary from jurisdiction to jurisdiction and
could include employee salaries, office rent, certain charitable
contributions, and employee travel expenses. Consequently, any
listing of lobbying-related payments would be inconsistent and
potentially confusing, since a particular payment may be considered
"lobbying-related" in one jurisdiction but not in another.
In sum, information regarding the public policy activities of Altria
and its operating companies, including lobbying, is already largely
available, and such activities receive significant oversight by both
the Board and Company executives. The Company believes that its
focus should be on continuing its emphasis on compliance with all
applicable political compliance laws, including those requiring
disclosure of its lobbying activities. Preparing and maintaining
the report requested in the proposal would not be financially
disciplined and, as such, would not be in the best interest of the
Company or its shareholders.
For these reasons, the [Altria] Board recommends a vote AGAINST this
proposal, and proxies received by the Company will be so voted unless
shareholders specify a contrary choice in their proxies.
EXCERPTS from The Associated Press, article in The Richmond Times-Dispatch and
other newspapers online; by Michael Felberbaum; Altria CEO conducts his final shareholder
meeting; May 17, 2012.
RICHMOND, Va. (AP) Outgoing
Altria Group Inc. CEO Michael E. Szymanczyk finished his final
shareholder meeting on Thursday much the same way as his first --
fielding attacks against the nation's largest tobacco company.
The owner of top-selling Marlboro cigarette maker, Philip Morris USA,
held its annual meeting Thursday in its headquarters city of Richmond
[Virginia]. It marked the last day for Szymanczyk, who has served as
chairman and CEO since March 2008 and in the same capacity for Philip
Morris USA from August 2002 through July 2008 before the company spun
off Philip Morris International Inc.
“It has been an honor to lead the reshaping of Altria,” said
Szymanczyk, who got choked up during his closing remarks about his
23-year career. “Altria and its companies have experienced significant
change since I first joined the company. Change is not new for our
companies. They have been successful for more than a century because
they have demonstrated the ability to adapt in dynamic industries and
to the world around them.”
Martin J. Barrington will replace Szymanczyk as CEO and chairman, and
David R. Beran will serve as president and chief operating officer.
During his presentation to shareholders, Szymanczyk touted Altria's
premium brands like Marlboro and said the company is well-positioned
for future growth in a changing industry. In addition to Philip Morris
USA, Altria owns U.S. Smokeless Tobacco Co., maker of brands such as
Copenhagen and Skoal, and Black & Mild cigar maker John Middleton
Co. The company also owns a wine business and holds a voting stake in
brewer SABMiller.
In 2011, the company saw its net income fall 13 percent to $3.39
billion on lease, legal and restructuring charges. Its net revenue
excluding excise taxes fell nearly 2 percent to $16.62 billion.
Shipments fell 4 percent to 135.1 billion cigarettes, largely on
declines from its premium brands.
However its 2012 first-quarter profit rose almost 4 percent as higher
prices and cost-cutting helped offset declines in cigarette volumes.
Shipments fell 2.6 percent to 31.1 billion cigarettes, but the Marlboro
brand gained market share and ended the period with a 42.3 percent of
the U.S. retail market.
“For nearly 60 years, Marlboro has been the cigarette that men smoke
for flavor, and adult smokers have been invited to `Come to where the
flavor is. Come to Marlboro Country,”' Szymanczyk said, adding that the
company is evolving the brand to try to keep it growing and steal
smokers from its competitors.
Like other tobacco companies, Altria is focusing on cigarette
alternatives, such as cigars, snuff and chewing tobacco, for future
sales growth because the decline in cigarette smoking is expected to
continue.
Altria also has been forced to cut costs as tax hikes, smoking bans,
health concerns and social stigma make the cigarette business tougher.
After completing a $1.5 billion multiyear cost savings program last
year, the company rolled out a plan to cut $400 million in
“cigarette-related infrastructure costs” by the end of 2013 in advance
of anticipated cigarette volume declines.
Szymanczyk said cost-cutting “continues to be a priority.”
Over the years, the question-and-answer sessions of tobacco company
annual meetings typically feature various groups attacking them for
selling products that are responsible for about 443,000 deaths a year
in the U.S. Szymanczyk's final shareholder gathering was no exception.
“With your retirement I'm sure you look at your legacy. Certainly you
and the company have a passion for success. I'm not sure about
satisfying your customers and their preferences unless they all have a
death wish,” Anne Morrow Donley, co-founder of the Virginia Group to
Alleviate Smoking in Public, told Szymanczyk. “At some point in the
future, you and the company may indeed be charged with crimes against
humanity _ I look forward to that.”
The 63-year-old Szymanczyk did not respond to those remarks. He also
has declined numerous requests for an interview with The Associated
Press.
Shareholders on Thursday elected 11 directors to the company's board
and rejected a shareholder proposal to have the company disclose its
lobbying policies and practices. ...
Web Editor's Note, The
following is in reference to the Altria meeting, May 17, 2012, comment
by Anne Morrow Donley, regarding the tobacco
executives and "crimes against humanity".
"Attorney Amos Hausner is the son of
Gideon Hausner, Israel’s Attorney General during the 1960s and chief
prosecutor of the Eichmann Trial. Amos Hausner was instrumental
in setting precedents in several fields of Israeli law, including the
restriction of smoking in public places and cigarette advertising since
1983. The World Health Organization awarded him an honorary medal
in 1994 for his achievements. He is a board member of the Massuah
Institute for the Study of the Holocaust; a member of the lay advisory
board of the Flight Attendants Medical Research Institute in Miami,
Florida; and of the Disciplinary Tribunal of Hebrew University in
Jerusalem. He was a Supreme Court Judge of the World Zionist
Organization between 1998 to 2006." [From The United
Nations
web
site on the 50th Anniversary of the trial of Adolf
Eichmann]
Transcription of the speech of Amos
Hausner, April 23, 2012, from the video at this link, Round-table
discussion
in
video
report
with
his
speech
beginning
at
approximately 00:34:03.
April 23, 2012,
United Nations, "to mark the 50th anniversary of the trial and the
deliverance to justice of Adolf Eichmann."
Narrator --
Ramu Damodaran, with the Outreach Division of the Department of Public
Information at the United Nations
Amos Hausner,
son of Gideon Hausner, the chief prosecutor in the trial of Adolf
Eichmann:
Thank you, and thank Dr. [Mark] Ellis
for his very interesting remarks. I think what I will have to say
right now will be kind of a follow up to what Dr. Ellis just said.
One of the arguments that Eichmann
presented throughout his trial through his lawyer was that actually
everything he did, everything, was 100% legal under the law where he
acted. That was the first defense.
Now the second defense, that actually
supplemented the first one, was that he actually did what his officers
told him, and he is entitled to the defense known as an "act of state"
-- which means an officer fulfilling his duties under the law of the
state where he serves.
Now those two defenses if accepted in
the Nuremberg trials and in the Eichmann trial would really lead to
chaos and disaster and eventually genocide.
Those two pleas were totally, but
totally rejected by those courts.
Today many of us tend to take this
rejection on the basis of the general principle that Dr. Ellis
mentioned to you before. The general norm, the universal norm
that "Thou shalt not kill", definitely not commit genocide, kill masses
of people.
But, at so many points in history,
this has never been taken for granted. I would like to call your
attention to a decision, an infamous decision, made right here in the
United States just one century earlier, the decision in the Dred Scott
vs. Sanford case [1857], the decision in which the United States
Supreme Court upheld slavery on legal grounds, on the grounds of
legality, when the court said that the Constitution of the United
States allows slavery. And even the Founding Fathers of the
United States thought that slavery was a legal institute.
And these legality arguments supersede
the right of the slaves who were considered property. They even
said that those people known as slaves --
meaning of an African origin, meaning people of a different skin color
-- cannot even be American citizens.
So at that point in time, the
"universal" argument was not in existence. And this is why you
are so proud later that such a principle of the "universal norm" now
takes precedence. And now nobody can make such arguments of
legality.
Let me bring you an example.
Just last month, a Congo General named
Lubanga was convicted of such a crime because he recruited young
children to his army. Now, in his own country, many people still
consider General Lubanga as a hero. If he were to be tried under
the
standards prevailing right there, his conviction was far from being
assured.
And I think I am standing on safe
grounds, when I say, and here I come to even more concurrent day to day
events that if the Syrian rulers and their subordinates are now put on
trial before any court, be it a domestic one or an international court,
they will not be able to argue the legality of what they did under
their own laws and under their own constitution.
And that brings me, speaking of the
example of where the Eichmann lesson has indeed been learned, to other
areas of the international law,
where I believe that the international law has a long way to go.
The first one is a matter that Dr.
Ellis touched on before, the issue of prevention. That is, is
international law really implemented in a form, in a manner, in a
fashion that may prevent such crimes of genocide, crimes against
humanity, war crimes from taking place?
Look what happened, for instance, in
Cambodia. Millions of people were slaughtered in Cambodia before
universal international law went into the picture. And our
aim was to punish those responsible.
In Rwanda, hundreds of thousands of
people were killed. It took many years for the international
community to intervene through the international legal institutions.
This is where international law
differs greatly from the domestic law. Domestic criminal law, the
way it is implemented, does not look only to the past, it looks into
the future. For instance, the domestic criminal law recognizes
such offenses as sedition, or incitement to commit a crime when there
is a clear and present danger that such a crime indeed will take
place. This is enough, the uttering of those words, that
constitute sedition is enough to constitute the violation of the
domestic criminal law.
Another one is the uttering of
threats, no physical action took place, just words, uttering of
threats, well, this is sufficient to constitute a crime
under most domestic laws.
And in my eye, the most important one
is the offense of conspiracy to commit a crime. Conspiracy to
commit a crime means two people, or more, but now two people are
enough, get together and make a decision to commit a crime --
freedom of speech -- they did nothing, maybe nothing will take place,
in most cases nothing takes place, and yet, the fact that they make
such a joint decision is sufficient to convict them of conspiracy to
commit a crime.
Is this the way international criminal
law is implemented? I'm afraid to say that it is not. Look
what is going on, for instance, with the threats that are now heard in
the squares of Tehran. The alleged successors of the Persian
Empire come and shout in the squares, "Death to Israel!"
OK. So there is incitement, there are threats, there is a
conspiracy, there are preparations, and yet there is no intervention of
the legal international justice system, which if it takes place, may
prevent wars, may prevent atrocities, may prevent Armageddon scenarios.
And when I get to this point, to the
intervention of the legal international criminal institutes, I would
like to call your attention to an area where I am involved which Ramu
[Damodaran] mentioned to you before. And this is a fact that 5.7
million people on this world die each year as a result of something
that people were drawing at their desk.
My father in his opening speech spoke
about the new kind of criminal, the one who is not using swords, the
one who is not using weapons, but the one who is sitting at his desk
drawing, making plans, the result of which kill many people.
This is the case with the cigarette
pandemic.
The people who design, make, market,
advertise these cigarettes know when they do so that every second
user of this product will consequently, unavoidably die from the use of
this product. This knowledge, and this act, and remember what I
said before, the denial of the legality argument, suffice to justify
bringing these people to justice before the international justice of
the criminal law, which I believe should be initiated by the health
organizations, the World Health Organization, and countries such as
Australia, Norway, Uruguay, which right now have very serious conflicts
over the right, the right to defend the health of their citizens
against the cigarette pandemic. It is time that the international
law will take and exercise its jurisdiction to punish and to avoid
these consequences.
Remember what I said before: The
international law has two facets -- it should be punitive to punish for
past events. But it should also be preventive international law,
to prevent crimes from happening.
And here we are talking about,
according to the data of the World Health Organization published last
year in 2011, we're talking about
1 billion people who die as a consequence of the use of tobacco by the
end of this 21st Century, something that can and should be
avoided.
Thank you.
Web Editor's
Note: Here is a follow up to the speech by Amos Hausner at the
United Nations, referenced in the item above this one; this is a
journalist's report on the first Israeli Conference on Tobacco or
Health.
EXCERPTS from The Jerusalem Post, June 14, 2012, Expert: Organized tobacco's days are
numbered, by Judy Siegel-Itzkovich.
... It is inevitable that “the days of
organized tobacco around the world are numbered” as exemplified by the
declaration of the government of New Zealand, which will be smoke free
by 2025 along with a growing number of other countries.”
This was the surprising and optimistic prediction on Wednesday of
long-time smoking-prevention lawyer Amos
Hausner, the head of the Israel
Council for the Prevention of
Smoking.
Hausner, the son of Gideon Hausner – Israel’s late attorney-general and
prosecutor of Nazi murderer Adolf Eichmann – echoed the famous
characterization of the Nazis by describing tobacco sales as the “the
banality of evil.”
This phrase was coined by Jewish political philosopher Hannah Arendt in
her 1963 work Eichmann in Jerusalem:
A Report on the Banality of Evil.
Her thesis was that the great evils in history generally, and the
Holocaust in particular, were not executed by fanatics or sociopaths –
but by ordinary people who accepted their state’s norms and therefore
regarded their actions as normal.
Hausner said in Tel Aviv on Wednesday that tobacco companies’ actions
also exemplify this because they know their products will kill half of
their users, but they continue to make them even deadlier and market
them.
“Unlike the Nazis, who were motivated by hate, anti-Semitism and
vicious racism, the tobacco companies are motivated by greed,” the
jurist said.
Hausner was one of the speakers at the first
Israeli Conference on
Tobacco or Health, which was held at Tel Aviv University and
attended
by over 150 people.
As for the “numbered days of organized tobacco,” Hausner said that
public opinion surveys in New Zealand show that two-thirds of the
public – including many smokers – advocate a “completely tobacco-free
country.” Other countries will follow, he said, adding that he hoped
Israel would eventually be among them.
A 2011 book with the title comparing tobacco to "a holocaust" called
for its abolition, a term that was used in mid-19th century America,
when slavery was legal, regarded as economically beneficial and widely
supported in the South. But just a
few years later, slavery was
completely abolished – as if it never happened. The same, said Hausner
to much applause, can happen with smoking. [Golden Holocaust: Origins of the
Cigarette Catastrophe and The Case for Abolition, by Robert N.
Proctor, 2011, University of California Press]
“Today, we are in the midst of an
irreversible process that will lead
to the termination of organized tobacco,” he said.
“The environment will be completely
tobacco-free. This is what people
all over the world want.”
“Only last year, a book was published that asked: ‘What will happen if
all Americans stopped smoking?’ Many people think this already. The
public mind is already set for this process,” Hausner declared.
He added that last month, a small shareholder in a US tobacco
conglomerate said when the CEO was about to retire: “Don’t you think
that you will be subject to indictments on the basis of your crimes
against humanity? Tobacco is killing 5.7 million people every
year
around the world.”
Hausner commented that instead
of just suing tobacco companies for
damages – such as the $245 billion judgement against organized tobacco
in 1998, which ordered the companies to compensate the 50 US states for
the costs of treating tobacco-related diseases – the legal action will
focus against “crimes against humanity, of homicide, even the genocide
of people by smoking their products.” Thus he predicted that such
lawsuits will replace settlements of compensation for financial loses.
Health Ministry director-general Prof.
Ronni Gamzu said that despite the slow decline in adult smoking
rates in Israel to a little over 20 percent, the percentage of those
who smoke must drop to 10% or less.
The country cannot afford to spend huge sums to treat patients harmed
by tobacco, he said, and the ministry will take increasingly strict
measures to raise tobacco taxes, restrict places where smoking is
allowed and limit advertising of tobacco products.
However, Gamzu erred when he
declared that “there is not a single
newspaper in Israel that does not accept tobacco advertising,” even
though he heard from The Jerusalem Post at a No Smoking Day press
conference a few weeks ago that it has not run tobacco advertising for
many years. The English-language Post also does not use photos of
celebrities, models and others who smoke or hold cigarettes.
Editor-in-chief Steve Linde confirmed
this no-tobacco advertising
policy, which the paper’s readers demand.
Gamzu later apologized for his
comment that all Israeli newspapers
advertise tobacco.
He added that he indeed heard that the Post has followed this policy for
many years but “forgot.”
However, newspapers read by the haredi community – including Deputy
Health Minister Ya’acov Litzman – regularly run tobacco
advertising,
with one ad employing havdala candles to remind readers to light up
their cigarettes when Shabbat ends.
Prof. Gregory Connolly, a
veteran researcher at the Harvard School of Public Health, said at the
conference that tobacco killed 100 million people globally in the last
century, with about five million people now dying from tobacco-related
causes annually.
The figure will rise to eight million by 2030 until serious action is
taken, he cautioned. “It could cost a billion lives in the 21st
century,” Connolly said.
He noted that in the last two decades, while local companies like Dubek
historically controlled tobacco production and sales in Israel,
multinational companies such as Philip
Morris have taken over the
majority of the industry here, reaping the profits and leaving behind
huge damage to the public health at the cost of billions of shekels a
year.
Connolly noted that the tobacco
industry conducts much research to make
cigarettes and other products more addictive to children and adults,
adding “pellets of menthol” that give the false impression that they
are “lighter and easier to smoke,” as well as selling nicotine-packed,
short cigarettes that enable employees to fully consume them before
their smoking breaks end.
Added
28
May
2012;
Updated
14
June,
2012