The RJ Reynolds Tobacco Company held its shareholders' meeting in Winston-Salem, North Carolina on April 19, 2000. The city's convention center was converted into a marketplace for RJR. Displays of Camel cigarettes and materials, complete with a mirror studded version of a camel amidst an Eastern bazaar competed with a display of materials for schools which stated it was to teach kids not to smoke. A simulated bar room with high stools, and Salem cigarettes was near portrayals of the "Pleasure to Burn" campaign.
Unlike the Philip Morris meetings [1999, 2000 in this web site], which are an armed camp, the RJR meeting is more relaxed in security, but still tightly controlled.
The auditorium itself was filled with smoke. Fewer people attended the 2000 meeting than in earlier years, and most of them appeared to be employees of RJR. About 50 employees were recognized for their work on the Eclipse cigarette.
This was the first meeting since the division of Nabisco from RJ Reynolds Tobacco. Andrew Schindler opened the meeting.
Both the RJ Reynolds and the Philip Morris 2000 meetings stressed changes in the companies, stressed their people on the covers of their annual reports, and said they were looking to new pathways, but all these pathways were in the same direction as the old ones: business as usual.
The Eclipse cigarette was touted as a breakthrough, to create a "safer" cigarette, while Schindler said there could never be a truly "safe" cigarette. This one, he noted, would be an alternative for those who do not "wish to quit" as he said it had caused fewer cancerous tumors in mice than did other cigarettes. Schindler was giving dangerous "health" advice as well as pushing a nicotine delivery device.
Following the general and financial business, shareholder resolutions were considered. There were two presented. Months before the shareholder meeting, all resolutions must go through a vigorous process, brought by shareholders with considerable stock value, and be presented before the federal Securities Exchange Commission. Lawyers from both sides argue for and against inclusion of the resolutions as a part of the meeting.
At the shareholders' meeting in April, the first resolution concerned tobacco advertising and youth, asking that an independent panel be established to determine if the Company's ads entice young people to use them.
Anne Morrow Donley moved the proposal, stating that Schindler had already expressed the motivation of the company to have an independent panel to examine the new Eclipse cigarette, so they should have nothing to fear from such a panel doing the same thing for the advertising package.
The proposal was seconded by David O. Lewis, M.D.
My name is David Lewis and I have been a physician since 1972. I second Item #4.
According to the RJR web page and shareholders' report, RJR is committed to telling young people not to smoke. However, our advertising does have a strong effect on the use of cigarettes by young people. RJR has proven this with the “Joe Camel” campaign which was begun in 1988. Over a 5 year period, the percentage of teens smoking Camels increased over 600%.
The most recent advertising campaign, “Pleasure to Burn” is just as sinister as Joe Camel. Here I have identical back covers of two magazines popular with young people: Sports Illustrated and Entertainment Weekly. There isn't a teenager in America who won't be affected by this ad.
It seems that self regulation of advertising might not be in the best interest of our company. An independent panel would help to guarantee that we are doing all that we can do to ensure that our products are not appealing to teenagers.
I urge your support of item # 4.
Proposal #5 concerned the paid placement of tobacco products in stores, so that young people can easily steal them. It was suggested that an independent panel be established to review the Company's policies and procedures to ensure that tobacco products would be outside immediate access and not easily be stolen.
The proposal was moved by the Rev. John Celinowski.
Good morning. My name is Fr. John Celichowski of the Capuchin Province of St. Joseph, the primary proponent of this resolution. I rise to urge its adoption.The proposal was seconded by David Lewis, M.D.:
The Supreme Court of the United States, in a ruling hailed by our Company and others in the tobacco industry, recently held that the Food and Drug Administration (FDA) lacked the authority to regulate cigarettes and other tobacco products. In doing so, however, the Court noted that the FDA had "amply demonstrated that tobacco use, particularly among children and adolescents, poses perhaps the single most significant threat to public health in the United States." Food and Drug Admin. v. Brown & Williamson Tobacco Corp. (21 March 2000).
In a press release following the announcement of the Court's decision, our Company noted that it was "willing to begin a dialog with Congress on reasonable options of additional regulation of the design and manufacture of cigarettes at the federal level." Our proposal is merely another "reasonable option" in that regulatory process. The only difference is that it concerns self regulation of our Company's marketing and sales practices.
It is our Company's stated position, as noted on the Inside RJR web site, that children should neither smoke nor even be exposed to secondhand smoke. Our Company supports laws that prohibit minors from purchasing cigarettes or other tobacco products. In addition, it is party to the Master Settlement Agreement (MSA), which includes many provisions aimed at preventing youth smoking. Further, our Company is party to a voluntary advertising and promotion code intended to discourage children and teens from experimenting with tobacco products - at least until they are adults and can make a fully informed and mature decision about the relative pleasures and health risks of cigarette smoking.
Despite these efforts, children are still getting their hands on cigarettes. My Province's Corporate Responsibility Office recently heard from the tobacco control compliance officer in a suburban Milwaukee public health agency. In her most recent check of 17 stores in the area, 30% were still selling cigarettes to minors.
It is our belief that adoption of a no-direct-sales policy can help our Company's efforts to prevent youth smoking by making sure that, in conjunction with the "We Card" program and existing laws, kids cannot in any manner get their hands on cigarettes. It will reduce the potential for theft, which remains a significant means through which young people obtain cigarettes. It will encourage retailers tempted to sell to kids to literally think twice before doing so: once when the youth requests one of our products, and another time when the retailer or his agent, tempted to make a sale of this high profit item, reaches for it.
We acknowledge that, if adopted, this proposal may create an inconvenience for some adult purchasers of our Company's products. We believe, however, that in light of the goal we all share - preventing kids from smoking - it is at best a minor inconvenience. We also believe that adoption of this proposal would be an additional demonstration of our Company's good faith and seriousness regarding youth smoking prevention as the battle over the regulation of tobacco products moves to Congress.
Thank you for your consideration of our proposal.
My name is Dr. David Lewis, and I second the Proposal on Youth Access to Tobacco Products.
Tobacco documents now available on the Internet reveal that RJR knows it must addict children to tobacco to assure future profits. One way to get children addicted to nicotine is to make it easy for them to steal cigarettes.
Last year Mr. Goldstone stated that RJR Tobacco Company has nothing to do with product placement. He lied. Please note the materials I present today with include:
1. Copies of RJR’s contracts made with individual stores.
2. Copies of checks drawn on RJR accounts made out to retailers.
3. Photographs of RJR tobacco self-service tobacco displays.
RJR argues that retailers will lose sales if cigarettes are not placed in self-service displays. I bring letters today from retailers who moved their tobacco products to locations behind the counters. Each of them testify that there has been no effect on their sale of tobacco products.
I urge the shareholders to support Proposal 5. This proposal permits RJR to demonstrate its commitment to its declaration that children shouldn't smoke. Proposal 5 simply requires that RJR tobacco products be placed out of reach of children and that an independent committee be established to guarantee that this happens. Nothing could be fairer- -either for children or for RJR.
I recommend Ms. Anne Landman of the American Lung Association of Colorado for membership on this committee. She is the lady who brought national attention to this problem.
and Answer Period
Unlike other years when employees and shareholders had several questions for the management, there were only three questions.
The first question was from Anne Morrow Donley, and concerned the materials that RJ Reynolds has prepared on young people not smoking. There are materials for school use, and for parents who smoke but do not wish to have their children smoke.
The question was, when will RJ Reynolds include the hazards of secondhand smoking in these materials, telling parents of the dangers of smoking around the children, as well as telling the young people the lethal dangers of breathing smoke and of blowing smoke at others.
Schindler said he would ask the person in charge of these materials to meet with the activists after the meeting, which he did. They agreed to "consider" the matter.
The second question concerned RJR and smuggling, asked by Dr. David Lewis.
My name is David Lewis and I am an Emergency Room Physician from Martinsville, Virginia.Schindler's answer was that RJR was not involved, and had sold that portion of the company to Japan, who would have to answer for any problems.
RJR was involved in smuggling cigarettes into Canada from 1990 until 1994. RJR established a subsidiary company, Northern Brands, for the sole purpose of running the smuggling operation. The Canadian Tobacco Company, RJR-McDonald, was a wholly owned subsidiary of our company. RJR-McDonald shipped cigarettes into the U.S. so that they could be smuggled back into Canada and sold tax-free.
Mr. Schindler, the Montreal Gazette on 12/18/99 detailed the involvement of upper level RJR executives in the smuggling scheme. I quote from the Gazette: “Les Thompson was little more than a front-line soldier in the massive corporate effort by RJR-McDonald to use the smuggling networks to make vast profits, increase its market share and ultimately pressure the Canadian government to reduce tobacco taxes.”
Northern Brands, which was located on RJR property in Winston-Salem, has already paid a 15 million dollar fine to a U.S. District Court in New York for its involvement in smuggling. Now the Canadian government has brought suit against our company for one billion dollars.
Mr. Schindler, you were the President of RJR Tobacco in 1994 when the smuggling was at its zenith. This smuggling may cost all the shareholders in this room one billion dollars. Why did you permit the smuggling to continue?
A second related question is the following: What type of bookkeeping procedures were used to account for the profits made from smuggling?
A question from the 1996 RJR meeting, reported by The Washington Post, April 18, 1996, writer Jay Mathews; headlined: LET KIDS CRAWL AWAY FROM SECONDHAND SMOKE, EXEC SAYS
THE WASHINGTON POST
WINSTON-SALEM, N.C. -- The chairman of the nation's second-largest tobacco company suggested Wednesday that infants endangered by their parents' or grandparents' smoking could simply crawl out of the room.
Charles M. "Mike'' Harper, chairman of RJR Nabisco Holdings Corp., maker of Winstons, Camel and other brands, said later he was being sarcastic, but many shareholders at the company's annual meeting here applauded the comment and some anti-smoking activists expressed outrage.
A series of exchanges between Harper and several anti-tobacco advocates provided most of the drama at the meeting, where, as expected, shareholders voted overwhelmingly against all challenges to the current RJR management.
The shareholders rejected a takeover attempt by investors Bennett LeBow and Carl Icahn by more than 3 to 1, and turned down plans to spin off RJR's food business, curb nicotine in cigarettes and do more to keep children and pregnant women from smoking.
Harper's remarks about children were provoked by Anne Morrow Donley, a Virginia Beach shareholder who also is founder of the Group to Alleviate Smoking in Public (GASP). She asked Harper if he or other board members had children or grandchildren and whether they wanted them exposed to secondhand smoke.
Harper, 68, said he had four children and 11 grandchildren and "I would not intrude on the right of any of them to smoke, but I would try to discourage them.''
Donley asked if Harper wanted them in a smoky room. He indicated that if they did not like it, they could leave.
"An infant can't leave the room,'' Donley said.
"Well, OK,'' Harper said. "At some point they will learn to crawl, and then walk.''
When the remark brought applause and some laughter from many of the 600 shareholders present, anti-smoking activist Michael H. Crosby, tobacco program coordinator of the Interfaith Center on Corporate Responsibility (ICCR), told Harper he found their response "disappointing and disturbing.''
Added April 30, 2000