SEC Move Helps Tobacco Foes


TALK about Daniel in the lion's den! Two religious groups are asking the shareholders of cigarette manufacturers to approve a resolution that would require the companies to get out of the tobacco business by the year 2000.

This would be the first time any blatant antismoking measures would be printed by the tobacco companies in their own proxy statements which are sent to shareholders. In the past, the companies, with the support of the Securities and Exchange Commission (SEC), turned down the measures claiming they dealt with ``ordinary business,'' which does not have to be presented to shareholders.

Last Friday the staff of the SEC reversed past policy and agreed with two Roman Catholic orders, the San Francisco-based Capuchin Fathers and the Adrian Dominican Sisters of Adrian, Mich., that the issue could be voted on by shareholders. In a letter sent to Philip Morris Companies Inc., John Brousseau, special counsel at the SEC, noted ``the growing significance of the social and public policy issues'' attendant to operations involving the manufacture of tobacco related products.

Anti-smoking groups are pleased by the SEC's decision. ``It seems the SEC has recognized the health problems of smoking are so serious in our society that the question of whether to stay in that business is an important policy issue,'' says Paul Neuhauser, who represented the religious orders and is also a law professor at the University of Iowa in Iowa City.

Matthew Myers, director of the Coalition For Smoking or Health, says this is the start of a process, much like the first proxies calling for companies to divest their South African businesses.

The religious orders' proposal will go to the shareholders of Philip Morris, American Brands, Loews Corporation, and Kimberly Clark, which makes the paper used by tobacco companies. The proposals will be in the form of amendments to the companies' articles of incorporation.

In addition, the Evangelical Lutheran Church In America is asking the shareholders of Philip Morris to set up a review committee to study the effect of the company's advertising on minors.

The Lutheran proposal particularly targets Philip Morris's Marlboro brand of cigarettes. Marlboro is smoked by about half of the teenagers who begin smoking in high school. The Lutherans estimate Philip Morris realizes about $45 million in annual profits from sales of Marlboros to minors. Philip Morris denies it markets cigarettes to minors. Recently, RJ Reynolds, a privately held company, announced it would begin marketing a new cigarette, ``Dakota,'' to compete with Marlboro.

One of the sponsors of the Capuchin proposal, Father Michael Crosby, plans to attend the annual meetings where he has unsuccessfully raised smoking and health issues from the floor in the past. ``There is not even an echo,'' he says, ``It just dies there.''

This time, however, Father Crosby plans to pursue the institutional shareholders of the tobacco companies. ``If they don't support us, we will go public with the extent of their holdings,'' says Crosby. He reasons that insurance companies will not be happy to have their holdings disclosed since smoking increases insurance premiums because of the greater health costs. The group must receive at least 3 percent of the vote in order to get it on the proxy next year.

The tobacco companies confirm that they will have the proposal in their proxies, which are mailed out at the end of March. (Philip Morris has appealed the decision to the full commission.) Most of the companies plan to issue their own statements on the proposals. American Brands, for example, said it will oppose the proposal since it is ``disadvantageous to shareholders.'' In its statement it did not address the health issues raised by the religious orders.

To be adopted, the proposals must win a majority of the shares voted at the annual meeting. Although not all shares are voted, Philip Morris, for example has 928 million shares outstanding. The chances of winning are slim. However, the companies say they are taking the group seriously.

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