of news articles.
Also, please see the 1999 announcements by Philip Morris.
The day dawned cold and damp, overcast. Over the past decade, most of the Philip Morris shareholders' meeting dates have begun with bright sunshine.
The dynamics also had changed this year, due to several victories in courtrooms against the tobacco industry.
However, one major thing was constant: while the industry proclaimed it had a new image, its every action proclaimed that it was still business as usual. This was the case also at the RJ Reynolds meeting the week before.
In addition, this industry was now faced with the Engle case brought by smokers, and a jury that in 1999 had already found this company, and other tobacco companies, liable for deceiving the public about the lethal health hazards and addictive nature of the product, and in 2000 had declared compensatory damages that must be paid to the victims, and already was set to begin on May 15th, 2000, to decide about punitive damages.
Philip Morris already had laid the foundation for its defense and plans for recovery from this.
First, Philip Morris, the master of deception launched, in 1999, a $100 million image make-over campaign, focusing attention in television and print ads on the "people" of Philip Morris, "working to make a difference." These ads sought to create a sudden metamorphous from the cold blooded, death dealing Philip Morris into a warm and fuzzy neighbor whose money could help everyone to a better life.
Second, Philip Morris became Chicken Little, running around crying, "The sky is falling, the sky is falling!" and spreading the rumor that tobacco companies might go bankrupt when the Engle verdict was returned. Philip Morris wrote and pushed legislation in several states hoping to confuse the jurors, delay the legal process, and cement the dependence by legislators and some wealthy attorneys on tobacco money. Interestingly, management did not mention bankruptcy at all at the shareholders' meeting.
Third, Philip Morris said it wanted to help write its own federal regulations. While they had fought all the way to the U.S. Supreme Court against Food and Drug Administration regulations, they said they would now support some "reasonable" regulations.
Fourth, Philip Morris created confusion over whether they did or did not publicly admit that nicotine is addictive, and that smoking kills people.
Fifth. PM announced that while it would still make the same old products, it was going to work towards reducing some of the dangers of smoking by making "safer" cigarettes, and by experimenting with a type of paper that would not burn as easily and thus prevent cigarette caused fires, even though it had fought both of these approaches for several years.
Sixth, then Philip
lead attorney in the Engle trial, Dan Webb, announced that the main
for the defense in May would be to show the jury that Philip Morris had
it says it has great people working to feed the hungry and help battered women;
it says it supports "reasonable" regulations on its company;
it says it wants to help make a safer product even though the executives and attorneys may or may not have admitted that it is actually a very dangerous product; and
it has threatened a lot of people with the specter of a loss of lots and lots of money - money that can only continue to flow if Philip Morris is allowed to continue addicting and killing, or in other words, to conduct business as usual.
Somehow in all of this, Philip Morris still has forgotten their consumers, the tobacco victims - the very same people Philip Morris convinced to smoke their products through ads, and kept them faithful through nicotine addiction.
The tobacco victims have not collected from Philip Morris - only the states have collected from Philip Morris.
In the Questions and
section of the meeting, questions were presented on a variety of topics.
One question was as follows:
A question asked by Virginia GASP's Anne Morrow Donley at the 2000 Philip Morris shareholders' meeting in Richmond, Virginia, was whether Philip Morris was paying to have smoking (not product placement, but smoking itself) in movies and television productions - whether Philip Morris was paying any writer, director, producer, actor, actress, or any other person having anything to do with movies for television or the theater, videos, or cartoons to put smoking into those productions. Geoffrey Bible responded first about product placement, but when reminded that the question was about smoking itself, Bible said that "Philip Morris does not make movies," and that he did not know why there was smoking in the films unless it "mirrors life."
Some very modest health resolutions were presented:
- to ask that genetically altered foods at least be so labeled, so that the consumer would be informedAnd this was the first test for a "changed" and "kinder, gentler" Philip Morris that is "working to make a difference." The "new, fundamentally changed" Philip Morris surely would agree to at least one, and most likely all of these resolutions.
- to ask that executive compensation be tied to a decline or increase in teen smoking
- to ask that an independent panel offer recommendations on whether advertising is directed to teens or children
- to ask that the company separate, or spin-off, the company's food products from its tobacco products
- to ask that the company clarify its stand on the addictive nature of its cigarettes, and the lethal nature of its cigarettes and determine a future course considering this determination.
But - Philip Morris' board recommended a "NO" vote on all of these, and the majority of shareholders followed that lead. Philip Morris' board, including the CEO, Geoffrey Bible, agreed to go on with "business as usual," the "same old, same old" say one thing, do another. Once again, the actions of Philip Morris speak louder than its words.
Proposal #3: Tobacco Executives' Compensation and Reduction of Teen Tobacco
Alvina Bey Bennett
Alvina Bey Bennett commented that her parents had made the ultimate sacrifice for the tobacco companies, dying from the use of those products. She said that while the Company says one thing about reducing teen smoking, it is really just business as usual.
Anne Morrow Donley
Anne Morrow Donley suggested that if Geoffrey Bible and the shareholders truly believe that the Company's methods will reduce teen smoking, then they should put their money where their mouth is and tie the millions in executive compensation to a reduction in tobacco use by teenagers.
Proposal #4 - Ensuring That Tobacco Ads Are Nor Youth-Friendly
Moved by the Rev. John
Rev. Celichowski urged that an independent panel be established to review the advertising of the Company, since many have already found these ads to be enticing to young people.
Seconded by Dr. David
Dr. Lewis suggested that many magazines which have a high percentage of youth readership are carrying Company ads which are enticing to teenagers.
Proposal #5 - Spin Off Tobacco Business From Rest of Corporation
Moved by Sister Barbara
Sister Aires reminded shareholders that litigation remained a grave threat, and would not go away.
Seconded by the Rev.
The Rev. Crosby urged shareholders to consider that when one year ago RJR had spun off its food division, Nabisco, the Nabisco stock price had significantly increased, and remained high. Stressing the bottom line, Rev. Crosby said that "while it may not be good for management to have a spin-off, it would be good for us, the shareholders, to have this spin-off," because the stock price would increase.
Proposal #6: Report Addressing the Implication of the Company's Tobacco Products
Moved by John Slade, M.D.:
On its web site, posted last October, the company declared that there was a medical and scientific consensus that the cigarette was a major cause of lung cancer, emphysema and heart disease. The company declared that smokers & potential smokers should rely on this consensus in making decisions about smoking.Seconded by Edward L. Sweda, Jr.,:
The resolution calls on the company to take affirmative steps to reduce illness and death among its customers as a logical extension of these web site statements. However, the company, in its response to the resolution, points out that the statements it makes on its web site are not statements of agreement with the scientific and medical consensus.
In fact, Philip Morris, despite its advice to its customers, does not itself rely on this consensus. If it did, the marketing for Marlboro, Basic, Benson & Hedges, Merit, and Virginia Slims would look very different. The marketing continues to recruit, not discourage, the use of these deadly, addictive products.
The President of the United States, The New York Times, and Time Magazine are but a few of those who have been deceived by Philip Morris into believing that the company has made an admission on disease causation. In fact, as the company points out, it has made no such admission. Nonetheless, it has taken no steps to correct the mistaken impressions it has created among many opinion leaders.
I urge passage of this resolution so that the company will itself come to rely on the facts that it says its customers should rely upon.
I am Edward L. Sweda, Jr., a shareholder from Massachusetts. Philip Morris is trying to make it appear that it is a fundamentally changed company -- when it really isn't.
Whether it's spending at least $100 million to tout a $60 million corporate giving program or emphasizing concerns about health (filters in the 1950s, low-tar cigarettes in the 1960s and 1970s or Accord and Oasis today), the bottom line remains: Business As Usual.
That's evidenced by management's opposition to this resolution.
A March 6th article in Adweek reports that the $100 million corporate image campaign "has done little to improve public opinion, an internal memo shows."
That's because -- fundamentally -- it's Business As Usual at Philip Morris.
Having 60% of all children smokers smoking One Brand -- this one (holding a pack of Marlboro) -- Marlboro.
There's a reason Business Week in a major cover story late last year called Philip Morris "America's Most Reviled Company." Business As Usual.
There's a word for this company's Business As Usual: Reprehensible. That's what the Engle jury considers when it starts considering the punitive damage phase on May 15.
I urge the shareholders to support resolution #6.
EXCERPTS from The Associated Press, April 28, 2000, writer Matthew Barakat; headlined: Philip Morris stronger than skeptics believe, CEO says
It's not as bad as it seems, Philip Morris Chairman Geoffrey C. Bible told shareholders at the company's annual meeting Thursday.
Bible acknowledged that Philip Morris stock has struggled recently. But he said Wall Street's concerns "are based on an extremely pessimistic reading'' of the tobacco industry's legal and political standing.
Philip Morris controls 50 percent of the U.S. cigarette market with brands including Marlboro and Virginia Slims. It also owns Miller beer and Kraft Foods, which produces Kool-Aid, Jell-O, Post cereals, Altoids mints and dozens of other brands.
While attention has focused on the Florida class-action verdict against the five major tobacco companies that could result in billions of dollars in punitive damages, Bible said 23 other class-actions suits against the company have been dismissed.
He also said Philip Morris "has made deep and abiding changes in the way we do business and the way we communicate with the public.'' He cited as examples the company's willingness to accept FDA regulation of tobacco and advertising campaigns designed to curb youth smoking and highlight the company's charitable contributions.
Bible's remarks were met with considerable skepticism. He fielded numerous hostile questions from stockholders affiliated with various activist groups, including many who questioned the company's commitment to reducing teen smoking.
Stockholders overwhelmingly defeated a proposal to dock directors' pay if teen smoking rates don't drop at least 30 percent in the next five years.
"Why not put your money where your mouth is?'' Anne Morrow Donley of the Virginia Group to Alleviate Smoking in Public asked Bible.
The board opposed the proposal, saying it has no direct control over how many teens smoke. But Bible said the company's commitment to curb teen smoking is legitimate.
"I've said it before and I'll continue to say it: ... We do not want kids to smoke,'' Bible said, adding that the company has spent more on its youth smoking prevention ads than required under the national tobacco settlement.
The proposal drew 8.1 percent shareholder support, compared with 4.1 percent last year.
Proponents of a proposal to spin off the tobacco business from Kraft Foods and Miller Beer advanced both ethical and financial arguments.
Sangita Nayak, one of several dozen protesters outside the company's complex, said Philip Morris uses Kraft to lend itself an aura of legitimacy it doesn't deserve. Nayak urged a boycott of Kraft products.
Others said the company should follow the lead of R.J. Reynolds, which spun off its Nabisco division last year.
The spin-off proposal received only 3.6 percent support, but some investors said the idea merits a further look.
"I'm not sure they're making a good decision,'' said one shareholder who declined to give his name. "If we were to separate them now, I think we'd get a better price.''
He also said he was beginning to grow weary of Bible's claims that better times lie ahead.
"We've been hearing that for a long time,'' he said.
Bible, in his speech to shareholders, said the company supports the development and marketing of reduced-risk tobacco products. While the company has said it would support FDA regulation, he said it's "essential that any regulation respect adult choice.''
Philip Morris Cos. Chairman and Chief Executive Geoffrey Bible comments on the legal challenges facing the U.S. tobacco industry, the company's slumping stock price, earnings growth and recovery in Eastern Europe. Bible made his comments at the company's annual meeting in Richmond, Virginia.
On the litigation environment:
"I doubt that plaintiff's lawyers will go away. They're a flourishing industry and I expect them to be around forever. "The litigation can be resolved over time. I think so long as we continue to harness our defenses, we're right on the law, and I think we'll overcome these cases in the long run.
"We're not in isolation. Many, many companies have a long list of litigation. It is manageable and over the long run we will overcome.''
On the company's stock price:
"While 1999 was a year of transition, our businesses came through in very good shape and we are beginning 2000 with strong momentum across all of our operating companies.
"Unfortunately, the performance of our stock price has not reflected this strength. Clearly, the primary reason for the low stock price is investor concern about the legal challenges and societal perceptions surrounding the domestic tobacco industry. I am convinced that these concerns are based on an extremely pessimistic reading of our company's situation.
"It is important to remember that the pace of legal action is slow, and final remedies are often delayed. Dealing with the litigation environment will require patience and fortitude.''
On compensatory verdict in the Engle class-action suit in Miami:
"These were mixed verdicts, with different findings for each plaintiff and each defendant, highlighting the fact that
individual issues predominate over common issues, thus making it clear that class actions are inappropriate for smoking and health cases.
"While we are pleased that the gag order has been lifted, I will not comment further on this case as it is now proceeding to the next phase.''
On a federal lawsuit filed against the industry:
"We believe this case has no basis of law and we will stand firm in our commitment to fight it. We also believe we have a good chance of prevailing, and if the case proceeds to trial, we have very strong defenses.''
On the regulation of cigarettes:
"Federal regulation of cigarettes as cigarettes, and not medical devices, makes sense.
"Now the issue of tobacco regulation is once again before the Congress, where it belongs. We are ready and eager to engage in a constructive dialogue about strong, meaningful and reasonable regulation of cigarettes.
"We agree with others that federal regulation of cigarettes should include oversight of manufacturing and ingredients, issues of disclosure and the development and marketing of reduced-risk products.
"It is essential that any regulation respect adult choice, be based on common sense and avoid measures that would encourage unintended consequences such as black market cigarettes.''
On urging shareholders to reject a proposal to split up the company:
"We have studied this matter very carefully and repeatedly in recent years. We continue to believe that in the current environment there is no feasible means of separating the company's tobacco businesses from the food and beer businesses in the type of transaction that would result in a meaningful, enduring increase in shareholder value.''
On the recovery of tobacco business in Eastern Europe:
"When there was an economic downturn in the region two to three years ago, we found our business suffering. We had been serving those regions by way of exports and now we have plants there. We took a hit because the people there just ran out of money and adults who smoked continued to down-trade (to cheaper cigarettes).
"There has been some recovery over the last six to nine months. Our premium products are recovering their volumes, but it's going to take quite a bit of time to complete itself. You won't see us get back to the same levels where we were for a couple of years.''
EXCERPTS from Reuters, April 27, 2000 6:19 pm, writer Edward Tobin; headlined: Philip Morris CEO reassures the faithful at annual meeting
As antismoking activists shouted outside and a plane with "Boycott Kraft'' banner buzzed overhead, the man who leads Philip Morris on Thursday told a cheering crowd of shareholders that the food and tobacco powerhouse was rolling with the punches and still on its stride.
"While 1999 was a year of transition, our businesses came through the year in very good shape and we are beginning 2000 with strong momentum across all of our operating companies,'' Chairman and Chief Executive Geoffrey Bible told some 1,100 shareholders gathered at the annual meeting of the world's largest cigarette maker.
That was the message that most of Bible's audience wanted to hear. The CEO was given a standing ovation when he approached the podium, and his remarks elicited wild cheering. Later, a handful of dissidents, including Roman Catholic nuns, either encountered snickering and cat-calls -- or were simply ignored -- when they tried to address the company faithful.
"We had a good quarter and we are off to a good start in 2000. We are on track to deliver 11-13 percent growth in earnings per share for the year'' on powerhouse brands as Marlboro cigarettes, Miller beer and Maxwell House Coffee, he said.
Shares of Philip Morris Cos. Inc. (NYSE:MO - news) -- which owns Kraft Foods Corp. -- dipped 5/16 to close at 22 on the New York Stock Exchange, a little higher than their 52-week low of 18-11/16.
Flanked by teleprompters, Bible defended his company's position as a leading cigarette maker in the face of mounting legal battles and criticism that Philip Morris markets cigarettes to children.
"We do not want kids to smoke,'' Bible said at a meeting complete with security guards around every corner, metal detectors and a ban on wireless phones and briefcases. "Let me repeat, we do not want kids to smoke. We are committed to doing out part to keep kids form smoking -- and our commitment is global.''
That message was part of a $100 million public relations campaign launched by Philip Morris last fall to dispel the company's image as a big tobacco empire. But that initiative appears to have done little to convince anti-tobacco activists, some of whom lined the streets in front of the Philip Morris complex where the meeting was held.
... INFACT -- an organisation that alleges Philip Morris promotes smoking among teenagers -- [had] some 40 people [who] held signs that read "Boycott Kraft'' and shouted at passersby.
"Philip Morris is spending millions of dollars to leverage Kraft's wholesome image to lend itself to a company that markets cigarette directly to children, that is why we are out here,'' Sangita Nayak, a director of INFACT, told Reuters. She said leafletting activists were taking part in protests in all 50 states on Thursday.
The demonstrators in Richmond were accompanied by an Uncle Sam effigy wearing a cigarette top hat and an oversized pin that read "Philip Morris for President,'' a reference to the company's political campaign contributions.
"Philip Morris has pledged $7 million in soft money to both political parties in this year's election in an attempt to buy influence for public health policy,'' Nayak alleged. "This must stop.''
Some protesters managed to address shareholders in the question-and-answer period.
The meeting was also well stocked with clergy who have a stake in the company. Half of the six shareholder proposals under consideration -- all defeated -- came from nuns affiliated with three different religious orders. Their interests ranged from Kraft's use of genetically engineered food to linking executive compensation to the reduction of teen smoking to spinning off the tobacco business, a proposal rejected at two previous annual meetings.
A nun from the Sisters of Charity of the Incarnate Word in Texas urged shareholders to vote for a spin-off.
"This company cannot increase its tobacco sales without harming human life,'' the nun said. "The mega-brands that this company has (14 products that had over $1 billion in sales in 1999) have the potential to enable everyone to benefit from a substantial rise in shareholder value'' without tobacco, adding that "litigation is not going away.''
Many of the questions from activist shareholders were met with cat-calls, snickering and laughter, forcing one person to leave the microphone after the crowd refused to quiet down. All proposals put in front of the board were defeated.
Several shareholders -- cheered by cigarette-puffing counterparts -- praised the company and its strategy of holding firm through the industry's current upheaval.
Bible, who refused to answer some questions from protesters, responded to most queries with an emphasis on the future of the company and not digging up the past.
But one antitobacco activist said the industry can't look forward without looking back.
"This was typical of Philip Morris turning its back on the past and focusing on the future,'' Edward Sweda of the Tobacco Control Resource Centre said. "By rejecting these shareholder proposals, they are taking a 'business as usual' approach, and that speaks louder than any P.R. campaign.''
Shareholders of Philip Morris Cos. Inc. rejected proposals to separate the company's food and beer businesses from its tobacco business and tie executive pay to reductions in youth smoking.
A few shareholders pushed the proposals during the cigarette giant's annual meeting yesterday in Richmond. Some of the 1,100 stockholders there argued that the firm is still marketing cigarettes to children despite its claims otherwise.
"Philip Morris is trying to make it appear that it has fundamentally changed as a company, when in fact it has not," said shareholder Edward L. Sweda Jr., a lawyer and anti-smoking activist. "Fundamentally, it's business as usual."
A few others said the company, which saw its stock price decline 57 percent in 1999 under a siege of smoking-related lawsuits, should follow in the footsteps of rival RJR Nabisco Holdings Corp. and spin off its tobacco business to increase shareholder value.
Both proposals were defeated, with 96 percent of the shares voting against the spinoff and 92 percent voting against linking executive pay with teen smoking reductions. Similar measures were defeated at previous annual meetings.
There is "no feasible means" to separate Philip Morris' tobacco business from its food and beer business, said Geoffrey C. Bible, Philip Morris' chairman and chief executive.
Despite the usual protests against the company, the annual meeting had a celebratory tone. Bible, whom stockholders greeted with a standing ovation, said 1999 was a good year for the company despite lawsuits against the cigarette industry.
"The fact remains that Philip Morris is a business powerhouse, with excellent growth prospects," he said.
Shareholders also soundly rejected proposals to have the company submit its cigarette advertising to independent review and to require corporate officials to study ways to "correct the defects" in cigarettes by reducing or eliminating chemicals suspected of causing lung cancer.
Shareholder Alvina Bey Bennett, a public health nurse whose parents died of smoking-related illnesses, said compensating company executives based on reductions in youth smoking would be fair, because Philip Morris has agreed not to target children in its advertising.
"My family made the ultimate sacrifice so that this company, and other tobacco companies, can be profitable," she said. "To link the executives' bonuses and benefits to reductions in youth smoking is reasonable."
Bible, however, said Philip Morris already has taken significant steps to reduce teen smoking, spending $100 million to create a department dedicated entirely to smoking-prevention efforts.
EXCERPTS from Business Week, April 28th, 2000, writer Nanette Burns, edited by Douglas Harbrecht; headlined: Smoldering Shareholders at Philip Morris' Annual Meeting
Welcome to another Philip Morris annual shareholder's meeting, where the ash trays are plentiful and smoking is encouraged. And as usual, litigation was the hot topic on Apr. 27 in Richmond, Va., where the tobacco maker is the second largest employer.
CEO Geoffrey Bible took the hotseat with Philip Morris' new chief counsel, Charles R. Wall. Bible recited a list of court victories the company has chalked up this past year. Addressing a crowd overflowing into three separate auditoriums -- many wearing hot-pink stickers reading "I'm proud to be a Philip Morris shareholder" -- Bible was polite and often smiling.
But when it came to the question-and-answer period, investors bored in on the giant Engle class action now pending in Florida. When asked by one investor whether the CEO ever sees a time in the future when these lawsuits will go away, Bible was somber. "I wouldn't be optimistic," he said, adding that "litigation takes patience and fortitude."
CENTER STAGE. The three-hour meeting featured everything from new TV ads for Miller beer to a look at Kraft's retooled Web site. Philip Morris proudly noted that it has 76 different brands that generated $100 million or more in annual revenue over the past year.
But for activist investors in the audience, the issue of advertising to kids took center stage. Concerned that Philip Morris ads continue to appeal disproportionately to children, a rump group of clergymen, priests, nuns, and doctors voiced their support for shareholder resolutions aimed at stopping that.
A resolution that would link executive pay to a decline in teen smoking and one advocating a split of the company's tobacco and food businesses were also opposed by management and failed to get more than 8% of the votes.
"BUSINESS AS USUAL." Philip Morris has spent heavily on ads to change its public image and highlight the altruistic acts of the company and its employees. The campaign has an annual budget of $100 million, but Alvina Bey Bennett, a Richmond nurse and shareholder, wasn't impressed. "Mr. Bible says the company is changing, but it's obvious from the shareholder votes that it's business as usual, unfortunately," said Bennett, who attributes her mother's death from a heart attack last December to her lifelong cigarette use. "I'm not surprised."
One audience member called on Bible to apologize to the people who've died from cigarette smoking. "Of course we regret that anyone should pass away," Bible replied. "We're changing many of our policies. And with regard to youth, we're doing everything that we know how to stop [teen smoking]." Bible repeatedly cited the company's openness to "reasonable" regulation of tobacco.
Reverend Michael H. Crosby, a Benedictine friar who has been attending Philip Morris meetings since the 1980s, said advertising to kids is the biggest issue for him. "The fact is that the company continually says it is not advertising to kids and yet continually refused to have third-party verification of that," Crosby said.
Crosby, who organizes the activists, said he would pay for the analysis if the company will provide its advertising for review. And Crosby promised to be back in 2001, arguing for many of the same resolutions. Same time, same place, next year.
Updated 16 May 2000