Doing the right thing first is seldom easy. CVS Caremark announced hat it would become the first national pharmacy chain to prevent selling cigarettes along with other tobacco products altogether. The company’s chief executive, Larry J. Merlo, said “We came to the decision that cigarettes and providing medical care just don’t go together in the same setting,” based on the New York Times.
This is a gutsy, principled and potentially expensive move. It’s especially gutsy, and controversial, to get a publicly traded company.
The initial estimates are the decision will surely cost CVS Locations 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 buy a pack of cigarettes once they go to the drugstore. Once they exist, they probably pick up other considerations too. Maybe milk. Maybe candy. Maybe the prescriptions they need to counter the numerous harmful effects of smoking.
CVS is increasingly moving toward providing more health services at their stores. The pharmacy chain has got the second largest quantity of retail locations in the country, 800 which include “Minute Clinics” which provide basic care for common ailments and preventive measures like flu shots. Merlo has said CVS desires to add 700 more such clinics by 2017. The clear narrative CVS hopes to convey to the public is that it is actually a company less about selling assorted retail products and much more about meeting medical care needs which do not require a visit to the doctor.
We have without doubt that, as CVS says, companies dedicated to protecting health have no business within 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 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 whatever they want using their companies. They can decide to forego profit for principle.
A call like that one is tougher for the directors and managers of any publicly traded enterprise like CVS. There is a fiduciary duty to shareholders, which duty generally takes the form of maximizing the long-run value of the home – which is, the company – entrusted to them. CVS may reason that its long-run value is enhanced by sitting on principle in this way. It appears clear that the argument will, in large part, concern positioning the company to consider a more substantial share from the healthcare dollar going forward. The company’s leadership may also debate that sitting on principle will probably draw some customers to them, even since 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 impact on revenue and customer traffic is way more easily quantified compared to the projected and intangible benefits they presumably hope this decision can create.
For the time being, CVS is doubling down on its position. It will not only stop selling cigarettes and tobacco products completely by October, but it will launch a “robust national smoking cessation program” this spring, the L . A . Times reported.
Although some shareholders may be hard to win over, CVS’ decision is drawing praise from health care 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 in the Robert Wood Johnson Foundation, said from the decision, “CVS is clearly establishing a leadership position for making the nation healthier and then in constructing 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 illustration 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 of being patient with this particular change. In every case, I think the position of CVS 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 new board to pick new managers, or they can just sell their shares.
Congratulations to CVS on obtaining the guts to go first. This nonsmoker, at the very least, is ready to walk an extra block or two to show my appreciation through my purchases. The walking is going to be great for me, too.