Doing the right thing first is seldom easy. CVS Caremark announced hat it would become the first national pharmacy chain to prevent selling cigarettes and 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 in the same setting,” in accordance with the New York Times.
This is a gutsy, principled and potentially expensive move. It’s especially gutsy, and controversial, for a publicly traded company.
The first estimates are the decision will surely cost CVS Near Me 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, however, not many customers just buy a pack of cigarettes once they proceed to the drugstore. After they are available, they probably pick up other items 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 provides the second largest variety of retail locations in the nation, 800 which include “Minute Clinics” which provide basic take care of 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 towards the public is that it is really a company less about selling assorted retail products and a lot more about meeting healthcare needs which do not require a trip to the doctor.
We have no doubt that, as CVS says, companies focused on protecting health have no business inside the tobacco business. Many will probably argue they may 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 making use of their companies. They can elect to forego profit for principle.
A telephone call like this 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 shape of maximizing the long-run price of the home – that is certainly, the company – entrusted for them. CVS may reason that its long-run value is enhanced by standing on principle this way. It seems like clear that the argument will, in large part, concern positioning the company to consider a larger share of the healthcare dollar going forward. The company’s leadership may also debate that sitting on principle is probably going to draw some customers to them, even since they lose others.
Maybe that logic is sound, but it is not gonna be very easy to prove. I am certain someone will file a lawsuit obliging CVS Headquarters Address 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 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 tobacco products completely by October, however it will launch a “robust national smoking cessation program” this spring, the La Times reported.
Although some shareholders may be hard to win over, 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 from the Robert Wood Johnson Foundation, said in the decision, “CVS is clearly establishing a leadership position for making the land healthier and in building a culture of health.” (2) Such public endorsements are likely to help CVS justify its choice, though they may not 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, and the demonstration of a company within the health 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 change. In almost any case, I do believe the position of CVS Sunday 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 getting the guts to travel first. This nonsmoker, at least, is willing to walk an extra block or two to show my appreciation through my purchases. The walking will be beneficial to me, too.