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 health care 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 primary estimates are the decision will cost CVS Pharmacy 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 cigarettes and tobacco products, but not many customers just purchase a pack of cigarettes once they visit the drugstore. After they are available, 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 variety of retail locations in the united states, 800 which include “Minute Clinics” which provide basic take care of common ailments and safety measures like flu shots. Merlo has said CVS wants to add 700 more such clinics by 2017. The clear narrative CVS hopes to convey to the public is that 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 without doubt that, as CVS says, companies dedicated to protecting health have no business inside the tobacco business. A few will probably argue that 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 whatever they want with their companies. They can elect to forego profit for principle.
A call like this is tougher for your directors and managers of any publicly traded enterprise like CVS. There is a fiduciary duty to shareholders, and that duty generally takes the form of maximizing the long-run worth 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 in this way. It seems like clear this argument will, in large part, concern positioning the company to consider a larger share from the healthcare dollar going forward. The company’s leadership may also debate that standing on principle is probably going to draw some customers in their mind, even because they lose others.
Maybe that logic is sound, but it is not likely to be simple to prove. I am sure someone will file a lawsuit obliging CVS Customer Service Phone Number to prove it, too. Unfortunately for CVS’ directors and management team, the likely effect on revenue and customer traffic is way more easily quantified compared to projected and intangible benefits they presumably hope this decision can 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, nevertheless it will launch a “robust national quitting smoking program” this spring, the L . A . 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 closer to achieving a tobacco-free generation.” Dr. Risa Lavizzo-Mourey, president and chief executive officer of the Robert Wood Johnson Foundation, said from the decision, “CVS is clearly establishing a leadership position to make the nation healthier and in building a culture of health.” (2) Such public endorsements will probably 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 illustration of a company in the healthcare business making its customers’ health its chief business focus is actually a powerful one. Time will zrfhfn if CVS’ shareholders will reap the rewards to be patient with this particular change. In every case, I believe the job of CVS Store 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 brand new board to pick new managers, or they can just sell their shares.
Congratulations to CVS on having the guts to go first. This nonsmoker, at least, is willing to walk an added block or two to show my appreciation through my purchases. The walking will likely be beneficial to me, too.