Doing the right thing first is seldom easy. CVS Caremark announced hat it would become the first national pharmacy chain to stop 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 within the same setting,” in accordance with the New York City Times.
It 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 definitely cost CVS 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, however, not many customers just get a pack of cigarettes when they go to the drugstore. Once they are there, they probably pick up other items too. Maybe milk. Maybe candy. Maybe the prescriptions they need to counter the various ill 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 in which include “Minute Clinics” that offer 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 for the public is it is really a company less about selling assorted retail products and much more about meeting healthcare needs which do not require a trip to the doctor.
We have undoubtedly that, as CVS says, companies focused on protecting health do not have business within 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 will not 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 making use of their companies. They can choose 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. They have a fiduciary duty to shareholders, which duty generally takes the form of maximizing the long-run price of the property – which is, the company – entrusted for them. CVS may argue 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 take a bigger share from the healthcare dollar moving forward. The company’s leadership may also reason that standing on principle is probably going to draw some customers in their mind, even because they lose others.
Maybe that logic is sound, however it is not gonna be simple to prove. I am sure someone will file a lawsuit obliging CVS Headquarters Address to prove it, too. Unfortunately for CVS’ directors and management team, the likely effect on revenue and customer traffic is far more easily quantified than the projected and intangible benefits they presumably hope this decision can provide.
For the time being, CVS is doubling down on its position. Not only will it stop selling tobacco products completely by October, nevertheless it will launch a “robust national smoking cessation program” this spring, the L . A . 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 even 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 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 is doing wrong by doing the right thing. Even a public firm can lead by example, and also 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 of being patient with this particular change. In every case, I 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 brand new board to pick new managers, or they can just sell their shares.
Congratulations to CVS on having the guts to visit first. This nonsmoker, at the very least, is willing to walk an additional block or two to show my appreciation through my purchases. The walking will be beneficial to me, too.