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 health care just don’t go together in the same setting,” according to 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 initial estimates are the decision will definitely cost CVS Locations Near Me 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 tobacco products, although not many customers just get a pack of cigarettes whenever they proceed to the drugstore. After they exist, they probably pick up other considerations too. Maybe milk. Maybe candy. Maybe the prescriptions they need to counter the various harmful effects of smoking.
CVS is increasingly moving toward providing more health services at their stores. The pharmacy chain provides the second largest variety of retail locations in the country, 800 in which include “Minute Clinics” which provide basic care for 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 health care needs which do not require a visit to the doctor.
We have without doubt that, as CVS says, companies centered on protecting health have no business in 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 fails to inexorably poison us as tobacco does.
If CVS were a privately owned company, the analysis could stop there. Private business owners can do anything they want with their companies. They can elect to forego profit for principle.
A telephone call like that one is tougher for your directors and managers of the publicly traded enterprise like CVS. These people have a fiduciary duty to shareholders, and this duty generally takes the type of maximizing the long-run worth of the house – that is, the company – entrusted to them. CVS may reason that its long-run value is enhanced by standing on principle in this way. It seems like clear that this argument will, in large part, concern positioning the company to consider a more substantial share from the health care dollar going forward. The company’s leadership may also reason that standing on principle will probably draw some customers in their mind, even as they lose others.
Maybe that logic is sound, but it is not going to be very easy to prove. I am sure someone will file a lawsuit obliging CVS Corporate Office Phone Number to prove it, too. Unfortunately for CVS’ directors and management team, the likely influence on revenue and customer traffic is much 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. Not only will it stop selling tobacco products completely by October, however it will launch a “robust national quitting smoking program” this spring, the Los Angeles Times reported.
Although some 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 nearer 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 in making the nation healthier and in creating a culture of health.” (2) Such public endorsements are likely to help CVS justify its choice, though they may not really 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 demonstration of a company inside 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 for being patient with this particular change. In every case, I do believe the position of CVS Holiday 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 obtaining the guts to go first. This nonsmoker, at the very 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.