Doing the right thing first is seldom easy. CVS Caremark announced hat it would become the first national pharmacy chain to prevent selling cigarettes as well as other 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 within the same setting,” in accordance with the New York City Times.
It really is a gutsy, principled and potentially expensive move. It’s especially gutsy, and controversial, for any publicly traded company.
The first estimates are the decision will cost CVS Hour about $2 billion in sales, or about 17 cents per share of stock, annually. I suspect these estimates are most likely low. CVS may only sell $2 billion in tobacco products, however, not many customers just purchase a pack of cigarettes whenever they go to the drugstore. Once they are there, they probably pick up other things too. Maybe milk. Maybe candy. Maybe the prescriptions they have to counter the numerous 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 nation, 800 of which include “Minute Clinics” which provide basic take care of 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 for the public is it is a company less about selling assorted retail products and a lot more about meeting health care needs which do not require a trip to the doctor.
I actually have no doubt that, as CVS says, companies focused on protecting health have no business inside the tobacco business. Some will probably argue they have no business in, say, the candy business either. I don’t buy that logic, though. Candy does not inexorably poison us as tobacco does.
If CVS were a privately held company, the analysis could stop there. Private company owners can do anything they want with their companies. They can choose to forego profit for principle.
A telephone call like that one is tougher for that directors and managers of any publicly traded enterprise like CVS. They have a fiduciary duty to shareholders, which duty generally takes the form of maximizing the long-run price of the house – that is certainly, the company – entrusted for them. CVS may reason that its long-run value is enhanced by standing on principle by doing this. It seems like clear that the argument will, in large part, concern positioning the company to take a larger share from the healthcare dollar going forward. The company’s leadership may also debate that standing on principle will probably draw some customers to them, even because they lose others.
Maybe that logic is sound, however it is not gonna be very easy to prove. I am certain someone will file a lawsuit obliging CVS Corporate Office Address to prove it, too. Unfortunately for CVS’ directors and management team, the likely influence on revenue and customer traffic is way more easily quantified than the projected and intangible benefits they presumably hope this decision can provide.
For the time being, CVS is doubling down on its position. Not only will it stop selling tobacco products completely by October, but 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 and Human Services, said in a statement, “Today’s CVS/Caremark announcement helps bring our country closer to achieving a tobacco-free generation.” Dr. Risa Lavizzo-Mourey, president and chief executive officer in the Robert Wood Johnson Foundation, said in 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 be enough alone to appease shareholders right away.
I don’t think CVS does wrong by doing the right thing. Even a public firm can lead by example, as well as the example of a company in the medical care business making its customers’ health its chief business focus is a powerful one. Time will zrfhfn if CVS’ shareholders will reap the rewards of being patient with this change. In any case, I think the job of CVS Pharmacy Hours – 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 obtaining the guts to travel first. This nonsmoker, at the very least, is willing to walk an extra block or two to show my appreciation through my purchases. The walking will likely be beneficial to me, too.