a is death is ais death bad investmentbad investment...smokeless tobacco • brands include:...

a d ives tment ac t ion gu ide

bad investmentbad investment

is adeath is adeath is a

your school’s money

the tobacco industry,corporate power,

INSIDEWhy should I careabout my school’sinvestments?

PAGE 3

How does myschool invest inthe tobaccoindustry?

PAGE 4

Risky tobaccobusiness

PAGE 6

Steps to launchyour campaign—atobacco divestmentroadmap

PAGE 8

Organizing toolsPAGE 10

Glossary PAGE 13

Resources PAGE 14

References PAGE 15

his Divestment Action Guide willshow you how to act locally tostop one of the worst globalindustries—Big Tobacco. Throughits investments, your school maysupport an industry that harmspublic health, communities and

the environment. Acting as both teachersand leaders, colleges and universities worktoward a more enlightened community. Butlike many people, most schools invest theirendowments and other funds with littlethought as to what impact their investmentshave on the world.

Your school’s investments are a tool to keepit financially secure. The power of studentscomes from their influence over how theirschool invests its endowment, foundationmoney, pension and other funds. Thisfinancial power can be used as a weapon tocombat socially reprehensible companies,like the tobacco industry.

During the racist and oppressive SouthAfrican policy, known as apartheid, studentsrallied and demanded that their schools sellstocks in companies doing business there.

The campus-baseddivestmentmovementhelped endapartheid inSouth Africa.Today,students aredemandingthat schoolsstop investingin the tobaccoindustry.

why should i care aboutmy school’s investments?

Answer these questions:

Do you care about public health and the environment?

Do you support workers’ rights?

Do you object to growing corporate globalization?

Do you believe in racial justice?

Yes? Then you should be concerned about the tobacco industry. Theglobalization of corporate tobacco is an environmental, social and publichealth disaster. Making your school divest from the tobacco industry isa step toward curbing one of the worst multinational industries around.

PUBLIC HEALTH Tobacco is expected to be the leading cause of deathworldwide in less than thirty years; 70% of all deaths from tobacco will occur in developing countries.

2As tobacco companies face more

litigation and regulation in industrialized countries, the industry is nowsuccessfully focusing on addicting developing countries—especially theirchildren. In developing countries, one in five children under the age of15 smoke.

3

THE ENVIRONMENT Almost a half a million acres of forest are lost to tobacco farming each year, mainly in developing countries.

4

CHILD LABOR A government study in Brazil found that 520,000 childrenwork on tobacco farms in Rio Grande do Sul—one third of them underthe age of 14.

5

GLOBALIZATION Philip Morris recently produced a study claiming theCzech Republic government actually saves money when its citizens die from smoking—$1,227 per dead smoker in health care, housing and pension costs.

6

RACIAL JUSTICE The tobacco industry has targeted specific racialpopulations with advertising and promotion. A study has found thatmajor African-American magazines received higher profits fromcigarette advertisements than did other magazines. Cigarettesmoking among African-American teens has increased 80 percentrecently—three times as fast as among white teens.

7

3

in their own words…

“We don't smoke the s---, wejust sell it. We reserve thatfor the young, the black, thepoor and the stupid.”1

—the response of an RJ Reynolds’ executive when asked by a former

“Winston Man,” David Goerlitz, why the RJR executives did not smoke2

T

UST Inc .• leading producer of

smokeless tobacco• brands include:

Copenhagen & Skoal• found in: S&P 500,

Russell 1000, 3000

RJ ReynoldsTobaccoHold ings• 2nd largest tobacco

company in US• brands include:

Winston & Camel• found in:

Russell 1000, 3000

Br i t i shAmer icanTobacco PLC• world’s 2nd largest

tobacco company• owns Brown &

Williamson• brands include:

Benson & Hedges,Kool, Lucky Strike

• found in: MorganStanley Capital Intl.Europe, Australasia, &Far East (EAFE) Index

BIGTobaccoRoll Call

Phi l ip Morr is Companies, Inc.• world’s largest

tobacco company• brands include

Virginia Slimsand the world’sbest-sellingcigarette,Marlboro

• almost two-thirds of itstobaccorevenues comefrom overseas

• found in: S&P 500,Russell 1000,3000

Loews Corp.• owns Lorillard

Tobacco company• brands include:

Newport, Kent, True• found in: S&P 500,

Russell 1000, 3000

Vector Group• owns the Liggett

Group whichmanufactures “safer”

discount cigarettes• found in: Russell 2000, 3000

how does my school invest in the

tobacco industry?

Schools invest in tobacco primarily throughtheir endowments and foundations. Withoutan outright policy against those investments,most educational institutions own some

tobacco stock.

College endow-ments andfoundationsaren’t smallchange. Endow-ments can totalhundreds ofmillions, some-times billions, ofdollars. TheUniversity ofCalifornia alonehas $52 billioncombined in its

endowment and other funds. Even a smallschool can have millions. Scripps College,for example, has over $200 million.

econ 101Getting your school to divest from tobaccorequires an understanding of your school’sinvestment strategy, which requires somefinancial basics. Investors are mostconcerned about two things: risk andreturn.

RISK Before thinking about making a greatreturn, investors always consider their risk—the likelihood of loss. Higher risk may meana chance at a higher return, but it may not.So schools must limit risk. One way to limitrisk is to diversify investments.


“Next to my wife and family, it is the mostimportant thing in my life.”8

—Geoffrey Bible, Philip MorrisCEO, quoted in Financial Timesabout the company’s stock price

4

RETURN You invest to make your moneygrow. Return is the rate of that growth.Institutions usually invest their money bothactively and passively to increase theirreturn and decrease their risk. Active invest-ing is literally picking stocks—buying thestock of individual companies.

Passive investing is buying into an index fundor group of stocks. Indexes can also bemeasurements of performance calledbenchmarks. For example, the Standard &Poor’s 500 Index (S&P 500) is a collection of 500 large corporate stocks that is oftenconsidered a benchmark of the overall stock market.

If your school uses the S&P 500 benchmark,it’s most likely invested in three tobacco com-panies: Philip Morris, UST Inc., and LoewsCorp. Other indexes, such as the Russell 1000and 3000, contain more big tobacco companies.

show me the moneyThe first step to a tobacco divestmentcampaign is figuring out where your schoolinvests its money. At public institutions, thisinformation should be publicly available.Public investments are public information soanyone can request it. Private schools don’thave to tell you where they invest. But mostschools aren’t sosecretive that theydeny informationto inquiringstudents. You mayhave to send awritten request tothe administration. If that doesn’twork, make gettingthe informationitself a goal ofyour campaign.


“…if you’re not going tosell to children... you’renot going to have anybusiness by definition in30 years.”9 —Bennet LeBow, CEO,

Vector/Liggett Group

5

Schools with

Tobacco Divestment

ActivityCity University ofNew York

Earlham College

Harvard University

Haverford College

Johns HopkinsUniversity

Lexington TheologicalSeminary

Mount HolyokeCollege

NorthwesternUniversity

Notre DameUniversity

Pomona College

Smith College

Stanford University

Tufts University

University ofCalifornia

University ofMichigan

University ofWashington

University ofVermont

Wayne StateUniversity

TobaccoDivestmentActivity in

Government

STATES

California• CA Public

Employees’Retirement System

• Pooled MoneyInvestment Account

• CA State Teachers’Retirement System

Massachusetts

Minnesota

New York

Pennsylvania• Public School

Employees'Retirement System

• Tuition AccountProgram

Vermont

CITIES

Boston

Burlington

Denver

New York City

Oakland

San Francisco

risky tobacco business

Some people say that divesting from tobaccohurts performance. They say tobacco is agood investment and divesting from tobaccoincreases risk.

Well, it depends upon your definition of agood investment. Investing in the tobaccoindustry is certainly not good for publichealth, and it may be bad for financialhealth, too. In the past, tobacco companieswere dependable investments. That wasuntil the tobacco industry was exposed fordeceiving the public and Congress. BigTobacco had purposefully made an evermore addictive product and marketed it toyouth. Tobacco stocks have experiencedvolatility in recent years due to all the indi-vidual, state, federal, and foreign lawsuitsand the increased regulation of the industry.

Let’s just say, for argument’s sake, thattobacco stocks suddenly skyrocket—maybebecause the tobacco industry effectivelyaddicts the Third World. Even if this was thecase, tobacco divestment would have littleeffect on market return or risk. Tobacco isnow less than 1% of the S&P 500. Unless aschool invests an abnormal amount of itscash in the tobacco industry, deletingtobacco from an institution’s portfolio isgoing to have little effect on risk and return.

the slippery slopePeople who object to tobacco divestmentoften say that it will start a slippery slope—“Today it’s tobacco, tomorrow it’s sweatshops;soon there will be nothing else to invest in.”Whether or not a fund decides to divest fromtobacco, other social issues will be raised.Your school will have to decide on each issue.Some schools have adopted policies to guidetheir decision-making on these issues.

For many issues, engaging companiesthrough dialogue or shareholder resolutionsis the right way. But in the case of tobaccocompanies, divestment is the only viableoption left. Tobacco companies will not stopmaking and marketing products, which killwhen used as directed.

is divestment legal?Yes! Divestment is totally legal. A Baltimorecase about South Africa divestment heldthat it was legal (Board of Trustees v. Mayorof Baltimore).

11Schools just need to take the

proper steps and fulfill their fiduciary duty.

What’s fiduciary duty? People trusted tomanage a fund such as an endowment arerequired to be prudent investors and notmake rash decisions. They must be loyal tothe beneficiaries of the funds.

Violations of that trust come from doingsomething illegal, like stealing money, orfrom taking too little care in makingdecisions. Each investment decision must bewell researched and reasonable at the timeit is made. College trustees must take timeand study an issue like tobacco divestmentbefore they make a decision. For thatreason, tobacco divestment campaigns cantake some time, but be patient. They work.

76


“I can’t answer the moraldilemma. We are in thebusiness of pleasing ourshareholders.”10

—a Rothmans Public Affairs Manager

the fence? Your coalition and/or your champion needs to meetwith them and educate them about tobacco divestment (seepage 10).

• Ask the student government and faculty senate for a resolutionof official support.

Step 3Use the Media

• Get your school paper to report on the information that youuncover about your school’s investments. Get a quote in thestory demanding tobacco divestment.

• Offer opinion pieces to the newspaper (see page 11).

• Organize a press conference to spread the word about yourcampaign off-campus.

Step 4Pick Your Battles—Move When the Time is Right

• Allow the trustees to perform their due diligence regardingtobacco divestment. Look at this as an opportunity for moreinformation!

• Consult with your champion as to when tobacco divestmentshould be presented to the board. Make sure that the timing is right.

• Prepare for a hearing on divestment. Decide which coalitionmembers should speak. Decide who should say what.

• Make your pitch for divestment!

Repeat Steps 2, 3 and 4 as needed.

steps to launch your campaign—a tobacco divestment roadmap

If you’re reading this, you’re probably already an activist on yourcampus for several great causes. The steps to a tobacco divest-ment campaign are similar to getting your school to sell fair-tradecoffee or stop buying sweatshop-made clothing. You need to decideupon your goal, build your case, create support for your position,and pick your battles.

Step 1 Make Your Case for Tobacco Divestment—Learn about Tobacco Divestment

• Find out how your school invests in the tobacco industry (seepage 11).

• Gather more information on your school’s investments and on divestment.

• Contact outside organizations that can help (see page 13).

• Gather information on the decision-making board of yourschool’s endowments or foundations.

• Contact institutions that have already divested for help withyour effort.

Step 2Build Support for Tobacco Divestment—Organize Your Community

• Build your coalition. Divestment campaigns can be a lot ofwork, but they give you the opportunity to work with newallies. Make sure you contact: pre-med and medical students,sympathetic professors and alumni, labor unions, religious andculturally based organizations, as well as public health,environmental, and human rights groups.

• Find a champion. Determine who on the decision making boardcould be a champion for tobacco divestment. Recruit thatperson to be your tobacco divestment champion. Sometimesthese champions are well known; other times, new championsappear with a little digging.

• Ask your champion to organize. Your champion has moreaccess to other decision makers than you ever will.

• Determine the position of the other decision-makers. Who arethe most skeptical or sympathetic to your position? Who is on

8 9


“What do you think smokers woulddo if they didn’t smoke? …Maybeyou’d beat your wife. Maybe you’ddrive cars fast. Who knows whatthe hell you’d do?”12 —Geoffrey Bible,

CEO, Phillip Morris

organizing tools

sample letter to university officials

10

sample letter requesting yourschool’s tobacco investments

Dear Treasurer:

The [ORGANIZATION] is interested in how and where our schoolinvests its endowment, pension plan, foundations, and any otherfunds. Specifically, we would like to know the exact amount that ourschool owns both actively and passively in tobacco investments.Please send us the specific domestic and foreign tobacco holdings.Please be sure to include these companies that are involved in themanufacture of tobacco products:

Philip Morris, Loews Corporation, US Tobacco, British AmericanTobacco, RJ Reynolds, Universal Corp., Schweitzer-Mauduit Inter-national Inc., Star Scientific Inc., Vector Group, Swedish Match AB,Altadis SA, Japan Tobacco Incorporated, Amer Group, Austria Tabak AG and Standard Commercial Corporation.

Please feel free to contact us with any questions. Thank you very much.

Sincerely,

[YOUR ORGANIZATION]

“The average life expec-tancy here is aboutforty years, infantmortality is high: the health problemswhich some say arecaused by cigarettesjust won’t figure as a problem here.”13

—Chris Burrel, Rothmans representative,in Burkina Faso


Dear University President or Board Member:

As students at [UNIVERSITY NAME], we are concerned that ouruniversity is supporting an industry which sells a deadly and addictiveproduct.

[UNIVERSITY NAME] is a respected member of our community,and produces quality graduates who make a positive difference intheir world. But the endowment and foundation that supports ourschool, as well as its pension plan, may be undermining its missionthrough investments in the tobacco industry. We believe theseinvestments are inappropriate for an institution of higher education.We ask that the university remove Big Tobacco from its portfolio.

Tobacco is expected to be the leading cause of death worldwide inless than thirty years, with 70% of those deaths coming in the devel-oping world. The tobacco industry has been universally condemnedfor its unethical practices and deceptive behavior. [ADD YOURPARTICULAR CONCERNS HERE.]

In the last two years, the Universities of California, Vermont,Michigan, and Washington and two of the nation’s largest pensionfunds—the California State Teacher’s Retirement System and theCalifornia Public Employees’ Retirement System—all decided todivest their tobacco holdings, joining dozens of other colleges,universities, churches, cities, counties, and states nationwide. Theserespected institutions provide ample precedent for both the ethicalnecessity and financial prudence of divestment. It’s time for[UNIVERSITY NAME] to join the tobacco divestment movement.

Thank you for your consideration of this serious issue. We lookforward to your response.

Sincerely,

[YOUR ORGANIZATION] 11

Active Management — A money-management approach based oninformed, independent investmentjudgment, as opposed to passivemanagement (indexing) which seeksto match the performance of theoverall market (or some part of it) bymirroring its composition or by beingbroadly diversified.

Benchmark — A standard, used forcomparison.

Beneficiary — An individual,institution, trustee, or estate whichreceives, or may become eligible toreceive, benefits under a will,insurance policy, retirement plan,annuity, trust, or other contract.

Bond — A debt instrument issued fora period of more than one year withthe purpose of raising capital byborrowing. A bond is generally apromise to repay the principal alongwith interest on a specified date(maturity).

Diversification — A portfolio strategydesigned to reduce exposure to risk bycombining a variety of investments,such as stocks, bonds, and real estate,which are unlikely to all move in thesame direction.

Divest — To sell off.

Due Diligence — The process ofinvestigation, performed by investors,into the details of a potential invest-ment, such as an examination ofoperations and management and theverification of material facts.

Fiduciary — An individual, corporationor association holding assets foranother party, often with the legalauthority and duty to make decisionsregarding financial matters on behalfof the other party.

Index — A benchmark against whichfinancial or economic performance ismeasured, such as the S&P 500.

Index Fund — A passively managedmutual fund that tries to mirror theperformance of a specific index, suchas the S&P 500. Since portfolio deci-sions are automatic and transactionsare infrequent, expenses tend to belower than those of actively managedfunds.

Passive Management — A moneymanagement strategy that seeks tomatch the return and risk character-istics of a market segment or index,by mirroring its composition.

Performance — The results of activi-ties of an organization or investmentover a given period of time.

Return — The annual return on aninvestment, expressed as a percentageof the total amount invested.

Risk — The quantifiable likelihood ofloss or less-than-expected returns.

Shareholder — One who owns sharesof stock in a corporation or mutualfund. For corporations, along with theownership comes a right to declareddividends and the right to vote oncertain company matters, including the board of directors.

Social Responsibility — The ideathat businesses should not functionamorally, but instead should contributeto the welfare of their communities.

Stock — An instrument that signifiesan ownership position, or equity, in acorporation, and represents a claim onits proportionate share in the corpora-tion’s assets and profits. Also calledequities or equity securities or corpo-rate stock.

Trustee — An individual or organiza-tion which holds or manages andinvests assets for the benefit ofanother.

Source:http://www.investorwords.com © 2000 InvestorGuide.com

glossary

1312

sample opinion piece fornewspapers

Every college graduate knows what its like to get that letter in themail, asking for a donation to support their beloved alma mater. Andwhy not? [UNIVERSITY NAME] is a leader in education and makesa positive difference in our lives. But the very investments thatsupport our school undermine its mission, because some of theendowment is invested in the tobacco industry. What message is[UNIVERSITY] sending by investing in Big Tobacco?

Big Tobacco is expected to be the leading cause of death worldwidein less than thirty years, with 70% of those deaths occurring in thedeveloping world. And the World Health Organization recently foundthat one in five children under the age of 15 in developing countriessmoke. [ADD YOUR PARTICULAR CONCERNS.] It is inappropri-ate for [UNIVERSITY] to benefit from this industry.

Ample precedent for divestment has been set by the Universities ofCalifornia, Michigan, Vermont and Washington, and dozens of othercolleges and universities; as well as pension funds, cities, counties,and states nationwide. The massive California Public Employees’Retirement System and the California State Teachers’ RetirementSystem both have recently divested. A broad based coalition supportstobacco divestment including [LIST GROUPS]. It’s time for[UNIVERSITY] to join the tobacco divestment movement.


“Thinking about Chinesesmoking statistics is liketrying to think about thelimits of space.”14

—R. Fletcher, Rothmans Regional Public Affairs Mgr

American Lung Associationof CaliforniaGovernment Relations Office921 11th Street, Suite 700Sacramento, CA 95814-2821(916) 442-4446(916) 442-8585 (fax)www.californialung.org

Council for ResponsiblePublic Investment (CRPI)405 14th Street, Suite 209Oakland, CA 94612(510) 208-0400(510) 663-3792 (fax)[email protected]

Investor ResponsibilityResearch Center (IRRC)1350 Connecticut Ave. NWSuite 700Washington, DC 20036-1702(202) 833-0700(202) 833-3555 (fax)www.irrc.org

Social Investment Forum1612 K St. NW, Suite 650Washington, DC 20006(202) 872-5319(202) 822-8471 (fax)[email protected]

Student Alliance to ReformCorporations (STARC)[email protected]

Technical Assistance LegalCenter (TALC)505 14th Street, Suite 810Oakland, CA 94612(510) 444-8252(510) 444-8253 (fax)www.phi.org/[email protected]

1. Plaintiff’s Second Amended Complaint, Texas v. Am. Tobacco Co. at 130 (E.D. Tex.Apr. 7, 1997) (No. 5:96CV91) available at <http://stic.neu.edu/Tx/2amdcom.doc>.

2. World Bank. Curbing the Epidemic: Governments and the Economics of TobaccoControl, June 15, 1999.

3. World Health Organization. “One in Five School Children Smoke in DevelopingCountries, New Survey Shows.” WHO Press Release, August 14, 2000.

4. Helmut J. Geist. “Global Assessment of Deforestation Related to Tobacco Farming.”Tobacco Control 8 18-28 (Spring 1999).

5. Inter Press Service, “Child Labor Rampant in Tobacco Industry.” February 4, 1999.6. Gordon Fairclough. “Smoking Can Help Czech Economy, Philip Morris - Little Report

Says: Cigarette Smokers’ Frequent Early Deaths Offset Federal Medical Costs, StudyFinds.” The Wall Street Journal, July 16, 2001.

7. U.S. Department of Health and Human Services. Tobacco Use Among U.S.Racial/Ethnic Minority Groups—African Americans, American Indians and AlaskaNatives, Asian Americans and Pacific Islanders, and Hispanics: A Report of theSurgeon General. Centers for Disease Control and Prevention, National Center forChronic Disease Prevention and Health Promotion, Office on Smoking and Health,1998.

8. Richard Tomkins. “Bible Spreads the Gospel About Philip Morris.” Financial Times,(London) March 9, 1995, International Company News, 41.

9. Trial Transcript, Minnesota v. Philip Morris (Ramsey County Dist. Ct., 2d Dist., Minn.,February 10, 1998) (No. C1-94-8565) available at<http://www.tobacco.org/Documents/980210minnesota.html>.

10. J. Sweeny. “Selling Cigarettes to the Africans.” The Independent Magazine,October 29, 1988.

11. Board of Trustees v. Mayor of Baltimore 317 Md, 72, 562 A.2d 720 (1989).12. Jeffrey Goldberg. “Big Tobacco’s Endgame.” The New York Times Magazine, June 21,

1998: 36.13. J. Sweeney. “Selling Cigarettes to the Africans.” The Independent Magazine,

October 29, 1988.14. Judith Mackay. “Conference to Clear the Air.” South China Morning Post, August 24,

1997: 13.15. Zay N. Smith. “A Roundabout Way to Reclaim Sears Title.” Chicago Sun-Times,

April 18, 1996, Quick Takes: 26.16. Nigel Hawkes. “Smoking Ruins Your Sex Life, Men Are Told.” The Times (London),

June 2, 1999: Home News.

references

The organizations listed below can help you with your organizing, financial,

legal, and public health questions.

resources


“Mentioning impotence on [the warn-ing labels on cigarette] packs woulddetract from the fact that other more serious diseases are related to smoking.”16

—Spokesman for British American Tobacco

14 15

“If children don’t like to be in a smoky room, they’ll leave.”

When asked, “What about infants?”

“At some point, they begin to crawl.”15

—Charles Harper, Chairman of RJR Nabisco


This brochure was made possible by funds received from the Tobacco Tax &Health Protection Act of 1988—Proposition 99, under Grant Number 99-85063with the California Department of Health Services, Tobacco Control Section.

This Divestment Action Guide will help you run a tobacco divestment

campaign on your campus.

For additional information and resources, visit our new Web site:

www.bigtobaccosucks.org

Council for ResponsiblePublic Investment405 14th Street, Suite 209Oakland, CA 94612(510) 208-0400(510) 663-3792 (fax)[email protected]

CRP I

Front cover photo: US Congress asks the tobacco industry if nicotine is addictive.