Blue Smoke and Mirrors

HARVARD, thanks once again to its vast stock holdings, is getting a chance to put itself at the vanguard of the newest shareholder activism drive--divesting from American tobacco companies--and it looks as though it may accept the challenge. This may come as a surprise after Harvard spent more than a decade resisting calls for its divestment from stocks in South Africa-related companies.

That the University now may be willing to divest from tobacco companies to protest their unethical business dealings in other countries seems to be an immense inconsistency. Harvard should wield its influence as a stockholder to influence the tobacco companies--even though it still hasn't used that weapon to retaliate against companies for their involvement in the apartheid state.

The Corporation Committee on Shareholder Responsibility (CCSR), which formulates Harvard's investment policies, sent letters last July to the two major American tobacco companies, RJR-Nabisco and Philip Morris, asking them to explain why they do not voluntarily follow the same marketing practices in other countries as they are legally required to do in America. Harvard has yet to receive a response.

America may accept a little foreign governmental repression now and again, but it is no longer a nation which condones smoking. Restrictions on cigarette advertising, requirements on health warning labels and the new trend towards limiting the public areas where people can smoke are all measures reflecting the recognition that smoking is a health hazard. In both Europe and America, the numbers of smoking casualties have been greatly reduced thanks to these efforts.

UNFORTUNATELY, the heavy-smoking countries of East Asia, as well as many Latin American and African nations, have no such restrictions. Until recently, however, the East Asian nations had trade barriers against American tobacco companies to protect their domestic tobacco companies. After considerable pressure from the office of the U.S. Trade Representative, RJR-Nabisco and Philip Morris--both heavy Harvard investments--were allowed to flood those markets with their products. The companies have virtually monopolized the markets of Latin America and Africa for years.

These companies have taken advantage of the loose regulations in all of these countries, the East Asian ones in particular, to convince people that they should smoke. They have aggressively targeted young people and women with advertising that makes smoking appear glamorous, without providing any of the warnings that convinced so many Americans and Europeans not to smoke.

Many would argue that it is the responsibility of the individual governments to require the companies to warn people of the possible health hazards of smoking. That may be true, but why are we so quick to absolve these companies from any responsibility for the effects of their own products, and why do tobacco companies seem so unwilling to take any?

RJR-Nabisco and Philip Morris both vehemently contend that there is no proven link between smoking and diseases such as lung cancer, emphysema and heart disease. Then why do their advertising campaigns so often rely on giving the product away so people will try it? The most shameless example of such desperation advertising came when RJR-Nabisco sponsored rock concerts with famous entertainers and charged five empty cigarette packages for admission. This is reminiscent of the drug pusher who gives out samples to hook people; addicts have to supply their habits, after all.

THE absence of any sense of responsibility in the tobacco companies prompted the Advisory Committee on Shareholder Responsibility (ACSR), a panel of faculty, students and administrators which advises the Corporation on ethical investing, to recommend to the CCSR that Harvard divest from these companies. Ironically, the ACSR also once recommended that Harvard divest from its holdings in South African-related companies. This was advice which the University, which retains about $200 million in such stock, has largely disregarded-much to its discredit.

The question of hypocrisy in holding tobacco stocks comes up when one considers that numerous researchers and professors at the Medical School and School of Public Health have not only come out against smoking but continue to research the health hazards it causes and search for cures. Harvard even has an American Cancer Society professorship, funded by an organization that spends a great deal of time convincing others not to smoke.

The University's past record on stockholder activism should not stop us from encouraging Harvard to take action against the tobacco companies. In keeping with its stated investment policy, Harvard first should negotiate with the companies as a preferred stockholder, urging them to change their practices and threatening divestment if the companies resist. Universities, such as Harvard, which aspire to inculcating a sense of ethics in their students, must back up their words with actions.

The University should fully divest if diplomatic tactics fail. There is no reason for Harvard to associate with a company whose practices are unethical. While South Africa was never any different, Harvard now has a second chance to use its wealth and influence for good, and it should do so.