By Sander A. Flaum
Alarms went off when Larry J. Merlo, CEO of CVS Caremark, announced recently that his company was going to stop selling tobacco products by October 2014 and that he fully expected to incur a significant loss of revenue as a consequence.
A few cynics in the tobacco industry suggested it was an empty gesture, since the effect will probably be marginal. According to an analysis quoted in the New York Times, roughly 75% of cigarette sales are in convenience stores. Moreover, the projected $2 billion shortfall in sales will be a drop in the bucket compared with CVS’s annual sales of over $120 billion. Perhaps, they suggested, Merlo was just repositioning his company for a larger role as a healthcare provider.
I say good for Larry Merlo and CVS Caremark. Anyone connected with healthcare knows the horrendous cost that tobacco exacts in terms of death, disease, and disability. According to the U.S. Office of Health and Human Services, every day 3,200 hundred children try a cigarette for the first time and, of these, 700 go on to become smokers. Just about everything we’ve done in the past to curtail tobacco use– from package warnings to public smoking bans—has yielded benefits. So why not continue to do all that we can?
What appeals to me about the Merlos of the world is that, unlike executives who “bravely” announce controversial decisions only as a last resort when they have run out of options, these leaders have voluntarily stepped up to the plate. Moreover, by proactively doing the right thing, they disarm overzealous legislators who want to regulate all commercial behavior. In effect, CVS has said, “We’re not going to wait for Congress to pass laws forbidding pharmacies from selling tobacco. We are abandoning tobacco because, as healthcare providers, it is inconsistent with our mission and values”.
What if more leaders looked beyond their next financial quarter when deciding what’s the right thing to do? Imagine if tomorrow the CEO of Colt announced, “We will no longer manufacture or sell handguns that do not have a locking feature to prevent them from being operated by anyone other than an authorized user.” Would this spell the end of Colt? I don’t think so. In fact, it might spark an insurance provider to pick up the challenge and reply, “In turn, we will reduce liability premiums for families with “safer” handguns, such as those envisioned by Colt.”
Look at Craig Jelinek, CEO of Costco. Instead of fighting a battle against legislative increases in the minimum wage, Jelinek actively endorsed a minimum wage of over $10. He also practices what he preaches. According to Fortune, the average Costco worker takes home around $45,000 yearly versus $17,500 for a Sam’s Club employee. Paying a living wage doesn’t appear to have eroded Costco’s profits, either, which are now above $13 billion.
I wonder what would have happened if, back in 2008, a few leaders in the healthcare industry had taken the CVS and Costco approach. What if one or two major insurers had announced that they would no longer use “preexisting conditions” as an excuse to deny care? Or if an insurer had said, “We know your kids may need coverage even after they turn 21. That’s why we’ll let you insure them until they’re 26.” If more leaders in our industry had owned up to the inequities in healthcare access and had tackled the issues themselves, would we even be talking about Obamacare today?
That’s one of the best things about doing the right thing. Not only can you often accomplish a lot of good, but you’ll be doing it on your own terms.
I still remember that lesson I learned as a kid from my Mom and mentor, Rose Flaum.
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About the Author(s)
Sander A. Flaum is Principal, Flaum Navigators, and Chairman, Fordham Leadership Forum, Fordham University Graduate School of Business Administration. Contact him at [email protected]