Doing the right thing first is seldom easy. CVS Caremark announced hat it would become the first national pharmacy chain to stop selling cigarettes as well as other cigarettes and tobacco products altogether. The company’s chief executive, Larry J. Merlo, said “We came to the decision that cigarettes and providing healthcare just don’t go together in the same setting,” according to The New York City Times.
It is a gutsy, principled and potentially expensive move. It’s especially gutsy, and controversial, for any publicly traded company.
The first estimates are that the decision will definitely cost CVS Pharmacy about $2 billion in sales, or about 17 cents per share of stock, annually. I suspect these estimates are probably low. CVS may only sell $2 billion in cigarettes and tobacco products, however, not many customers just purchase a pack of cigarettes when they go to the drugstore. Once they exist, they probably pick up other considerations too. Maybe milk. Maybe candy. Maybe the prescriptions they have to counter the many harmful effects of smoking.
CVS is increasingly moving toward providing more health services at their stores. The pharmacy chain has the second largest quantity of retail locations in the country, 800 of which include “Minute Clinics” that offer basic look after common ailments and safety measures like flu shots. Merlo has said CVS would like to add 700 more such clinics by 2017. The clear narrative CVS hopes to convey to the public is it is actually a company less about selling assorted retail products and more about meeting medical care needs which do not require a trip to the doctor.
We have undoubtedly that, as CVS says, companies dedicated to protecting health have no business within the tobacco business. Many will probably argue they have no business in, say, the candy business either. I don’t buy that logic, though. Candy fails to inexorably poison us as tobacco does.
If CVS were a privately owned company, the analysis could stop there. Private company owners can do anything they want with their companies. They can decide to forego profit for principle.
A phone call like this one is tougher for your directors and managers of the publicly traded enterprise like CVS. There is a fiduciary duty to shareholders, which duty generally takes the shape of maximizing the long-run price of the property – which is, the company – entrusted for them. CVS may debate that its long-run value is enhanced by sitting on principle by doing this. It seems like clear that the argument will, in large part, concern positioning the company to take a bigger share of the healthcare dollar going forward. The company’s leadership may also argue that standing on principle will probably draw some customers in their mind, even since they lose others.
Maybe that logic is sound, but it is not likely to be very easy to prove. I am sure someone will file a lawsuit obliging CVS Hq to prove it, too. Unfortunately for CVS’ directors and management team, the likely influence on revenue and customer traffic is far more easily quantified compared to the projected and intangible benefits they presumably hope this decision will create.
For the time being, CVS is doubling down on its position. Not only will it stop selling cigarettes and tobacco products completely by October, however it will launch a “robust national smoking cessation program” this spring, the Los Angeles Times reported.
While many shareholders may be hard to make an impression on, CVS’ decision is drawing praise from medical professionals and antismoking groups. Kathleen Sebelius, secretary of Health insurance and Human Services, said in a statement, “Today’s CVS/Caremark announcement helps bring our country even closer to achieving a tobacco-free generation.” Dr. Risa Lavizzo-Mourey, president and chief executive officer from the Robert Wood Johnson Foundation, said from the decision, “CVS is clearly establishing a leadership position in making the land healthier as well as in creating a culture of health.” (2) Such public endorsements will likely help CVS justify its choice, though they may not enough alone to appease shareholders right away.
I don’t think CVS is performing wrong by doing the right thing. Even a public firm can lead by example, as well as the example of a company within the medical care business making its customers’ health its chief business focus is really a powerful one. Time will zrfhfn if CVS’ shareholders will reap the rewards for being patient with this change. In almost any case, I do believe the job of CVS Pharmacy Hours Of Operation – besides being ethically strong – has sufficient business justification that courts should refrain from second-guessing it. If shareholders are unhappy, they can elect a whole new board to pick new managers, or they can just sell their shares.
Congratulations to CVS on getting the guts to travel first. This nonsmoker, a minimum of, is ready to walk an added block or two to show my appreciation through my purchases. The walking will likely be great for me, too.