By Edward L. Sweda, Jr.
In January 2012, Altria Group, Inc. announced that CEO Michael E. Szymanczyk would retire after the completion of the company’s Annual Shareholders Meeting in Richmond, Virginia on May 17. Mr. Szymancyk worked for the company in various capacities for 23 years. Michael J. Barrington was named to succeed him as Chairman and CEO, while Dave Beran was selected to take over as President and Chief Operating Officer .
While Mr. Szymancyk can take advantage of generous compensation – a pay package valued at $10.2 million for fiscal year 2011 for his work as the CEO of America’s largest cigarette manufacturer, there are many others who are not in a position to enjoy retirement. These include the hundreds of thousands of Americans who annually die prematurely due to smoking-caused diseases, as well as from exposure to secondhand smoke.
As usual, the biggest portion of time at the Annual Shareholders Meeting was devoted to the CEO’s business report on the prior year. During this presentation, Szymanczyk said that Altria had “successfully managed” the external challenges of litigation.
However, during the question-and-answer session, this author noted that, in late March 2012, the U.S. Supreme Court had declined to consider Altria’s appeal in the Campbell case and Reynolds American’s appeal in the Martin case. In its petition for certiorari filed in December 2011, the attorneys for Reynolds American alleged that “in their conduct of Engle Progeny litigation, the Florida state courts are engaged in serial due process violations that threaten the defendants [including Altria] with literally billions of dollars of liability.”
The attorneys also warned that if the U.S. Supreme Court did not provide “prompt review,” then “the massive liability imposed on the Engle defendants – which currently stands at over $375 million in adverse judgments – will likewise steadily increase as Engle progeny trials continue with no end in sight.” So, this doomsday scenario outlined by tobacco company attorneys is on track to occur, thanks to the U.S. Supreme Court’s refusal to hear the appeal. Therefore, I asked Mr. Szymanczyk: “Why shouldn’t investors and shareholders rely on what tobacco company lawyers said to the U.S. Supreme Court, rather than what you are telling us today?”
In response, Mr. Szymanczyk referred the audience (which included people listening to a webcast of the meeting) to the company’s latest 10-Q report, which contains 32 pages of information on tobacco litigation.
Returning to the theme of retirement, Anne Morrow Donley, a Virginia shareholder, addressed CEO Szymanczyk directly. “With your retirement, I’m sure you look to your legacy. Certainly you and the company have a passion for success. I’m not sure about satisfying your customers’ and their preferences unless they all have a death wish,” she said. “One of every two of your tobacco customers dies from using your tobacco products, often from a debilitating illness. At some point in the future, you and the company may indeed be charged with crimes against humanity – I look forward to that,” she concluded.
After the question-and-answer session, the next order of business was the consideration of a shareholder resolution, submitted by the Province of St. Joseph of the Capuchin Order in Milwaukee. The proposal, which dealt with Altria’s lobbying activities, called for on the Board of Directors to prepare a report that would disclose, on an annual basis:
- “Company policy and procedures governing the lobbying of legislators and regulators, including that done on our company’s behalf by trade associations. The disclosure should include both direct and indirect lobbying and grassroots lobbying communications.
- A listing of payments (both direct and indirect, including payments to trade associations) used for direct lobbying as well as grassroots lobbying communications, including the amount of the payment and the recipient.
- Membership in and payments to any tax-exempt organization that writes and endorses model legislation.
- Description of the decision making process and oversight by the management and Board for
- Direct and indirect lobbying contribution or expenditure; and
- Payment for grassroots lobbying expenditure.”
The key goal of the resolution is transparency. Father Michael Crosby, a Capuchin Franciscan, endorsed the proposal, noting that his order and “eight other members of the Interfaith Center for Corporate Responsibility have submitted the resolution that has received the support of one of the biggest institutional advisor groups in the United States. ISS, Institutional Shareholder Services. When they analyzed what we are asking for, and what the company’s response is, they said that it was not adequate enough to support the company, so they are basically supporting us.”
Father Crosby continued, contending that Altria has a “culture of connivance.” Citing the election battle in California over Proposition 29, a proposition would, for the first time in 14 years, raise the state cigarette excise tax by $1 per pack to help fund cancer research. Father Crosby noted that Altria “has contributed two thirds of the $40 million trying to undermine” support for the proposition. On the “main web site of this group in California that is against” Proposition 29, it says it is supported by small business. “There is no mention that two thirds of all the money going into this is from a big business like” Altria, Father Crosby said. [Initial reports on the June 5, 2012 vote in California show a very narrow defeat for the proposition, by a margin of 50.8% against versus 49.2% in favor].
Father Crosby also condemned Altria’s support for the American Legislative Exchange Council, noting that the company has a seat on ALEC’s board of directors. “It isn’t democracy. It’s corpocracy, and it’s hypocrisy when there is this connivance,” Father Crosby told the audience.
In seconding the proposal, this author noted that “this modest shareholder proposal comes at a time of unprecedented public concern and pushback about the excessively pervasive and powerful influence that corporations have in the American political system. In the wake of the January 2010 U.S. Supreme Court decision in the Citizens United case,… in which right-wing judicial activism has transformed the landscape of the American electoral process, certainly this resolution addresses a subject of utmost importance.”
I also noted that Altria had donated $50,000 to ALEC’s annual meeting for drafting legislation for Florida and other states that adopted the so-called “Stand Your Ground” legislation which has garnered international attention after the February 2012 fatal shooting of an unarmed 17-year-old, Trayvon Martin. “ Altria’s association with ALEC should have been disclosed to shareholders” long before now, I concluded.
In its opposition to the proposal, Altria claimed that it “provides extensive information on its website describing its public policy activities” and that the “additional report sought by this proposal is not necessary and would not provide meaningful additional insight into the Company’s activities in this area.”
The proposal was defeated with a preliminary result of 20.5% of shares in favor, with 79.5% of shares opposed.
So, after the meeting, Michael Szymanczyk did indeed retire as Altria’s CEO. His successor is expected to proceed with business as usual – as deadly as that business will be for untold millions of people.