Tobacco Divestment Weighed

News Feature

In a precedent-setting move, Harvard is considering divesting its stock holdings in two major U.S. tobacco companies.

The University wrote to both RJR-Nabisco and Philip Morris in July asking them to respond to charges that promotional techniques in Latin American, African and Asian nations are often heavyhanded. Harvard also asked the companies to explain why they do not place warning labels on cigarette packs, as is required in this country.

The Corporation Committee on Shareholder Responsibility (CCSR), which formulates Harvard's investment policy, sent the letters after the issue was raised by an advisory panel last spring. So far, the committee has received no response from the two multinational corporations.

"Some members of our committee...believe that Harvard, which refuses to own stock in some companies because it does not wish to be associated with particular economic activities (gambling; prostitution), should seriously consider placing the production and sale of cigarettes in that category," according to an internal memo written by the Advisory Committee on Shareholder Responsibility (ACSR). The ACSR is a panel of faculty, students and administrators which advises the Corporation on ethical investing.

Experts across the country said this week thatif Harvard were to decide to divest from tobaccocompanies it would be the first institution in thecountry to do so.


This latest move toward divestment comes aftera decade of pressure on the University to divestof stock from compnaies doing business in SouthAfrica, which led to a policy of selectivedivestment. Harvard in 1986 divested about $157million in South Africa-related stocks--about athird of its holdings at the time. That total hassince fallen to about $200 million, in partbecause of the October stock market crash.

The drive to divest from tobacco companiesseems likely to rekindle the debate about thebenefits of divestment. Harvard and other criticsof divestment have argued that in most cases, abetter alternative is constructive engagement, bywhich the University deliberately maintains itsstock to put pressure on companies.

Proxy Battle

The ACSR raised the possibility of divestmentafter a shareholder-sponsored resolution thisspring called for the two companies to report ontheir advertising and promotion campaigns indeveloping nations. The proxy fight, which wassponsored by an activist Jesuit order inMilwaukee, was not targeted against the companies'domestic business.

The ACSR said it is concerned about highprofile advertising campaigns in overseas nationsthat do not require health warnings on cigarettes.The dangers of smoking, which have been widelypublicized by the U.S. Surgeon General, are lesswell known in developing countries.

Although health warnings are now required oncigarette packaging in the U.S. and in Europe,most other nations lack such requirements. Lastyear, overseas sales by RJR increased about 10percent, although U.S. sales have remained flat.

"We believe that companies seeking to expandsales in the third world should...tellstockholders their reasons" for not using healthwarnings, the ACSR said in a May memo.

But RJR and Philip Morris have denied chargesthat their marketing techniques are tooaggressive. They also contend that voluntarywarning labels are unnecessary since smoking hasnot been demonstrably linked to lung disease.

"There is no conclusive proof of acause-and-effect relationship between cigarettesmoking and chronic diseases, and the Company willcontinue to challenge allegations to thecontrary," Philip Morris said in a report releasedin response to the proxy resolution.

But the ACSR has challenged that account. Inits report to the CCSR, it cited World HealthOrganization statistics that attribute 2.5 milliondeaths each year worldwide to tobacco use.