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 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,” based on 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 initial estimates are that the decision will definitely cost CVS Near Me Open Now 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 cigarettes and tobacco products, but not many customers just purchase a pack of cigarettes when they go to the drugstore. When they are available, they probably pick up other things too. Maybe milk. Maybe candy. Maybe the prescriptions they have to counter the various harmful 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 nation, 800 of which include “Minute Clinics” that offer basic look after 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 towards the public is it is actually a company less about selling assorted retail products and much more about meeting healthcare needs that do not require a visit to the doctor.
I actually have undoubtedly that, as CVS says, companies focused on protecting health do not have business within the tobacco business. Some will probably argue 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 making use of their companies. They can choose to forego profit for principle.
A call like that one is tougher for that directors and managers of the publicly traded enterprise like CVS. They have a fiduciary duty to shareholders, which duty generally takes the type of maximizing the long-run price of the home – which is, the company – entrusted to them. CVS may reason that its long-run value is enhanced by standing on principle this way. It appears clear this argument will, in large part, concern positioning the company to consider a bigger share of the medical care dollar moving forward. The company’s leadership may also reason that standing on principle is probably going to draw some customers to them, even because they lose others.
Maybe that logic is sound, yet it is not going to be easy to prove. I am certain someone will file a lawsuit obliging CVS Corporate Office 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 compared to projected and intangible benefits they presumably hope this decision will create.
Meanwhile, CVS is doubling down on its position. Not only will it stop selling cigarettes and tobacco products completely by October, but it will launch a “robust national quitting smoking program” this spring, the Los Angeles 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 nearer to achieving a tobacco-free generation.” Dr. Risa Lavizzo-Mourey, president and chief executive officer of the Robert Wood Johnson Foundation, said of the decision, “CVS is clearly establishing a leadership position to make the land healthier as well as in constructing 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 doing wrong by doing the right thing. Even a public firm can lead by example, and the illustration of a company inside the health care 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 change. In any case, I do believe the positioning 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 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 the very least, is prepared to walk an added block or two to show my appreciation through my purchases. The walking will likely be good for me, too.