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Midterm

MGSC05H3 Midterm: Big Tobacco

2 Pages
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Fall 2017

Department
Management
Course Code
MGSC05H3
Professor
scottpratt
Study Guide
Midterm

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Big Tobacco
Steve F. Goldstone - CEO - RJR Nabisco Holding Corporation (owns R.J. Reynolds)
- oversee production of Camels, Winstons, and Dorals
- pushing drugs to children
- argue that his company never manipulated the nicotine levels in cigarettes
- argue that never marketed its products to teenagers
- argue never thought Joe Camel would be attractive to 5 year olds
- hero: legislate his industry into oblivion without his help
- pulling out was not a completely rash action because CEO knew Republican Congress's
election-year conversion to anti-tobacco cause
Congress:
- tax increase on tobacco?
- allow Food and Drug Administration regulate the nicotine out of cigarettes
Wall Street:
- tobacco companies = Sloan-Kettering views smoking
RJR is highly leveraged company, and its stock price is so depressed that the company's market cap--
the total value of all outstanding shares is actually exceeded by its debt
- informing shareholders that this is a "slow and manageable decline in an increasingly obsolete
industry"
OUTCOME
- Goldstone + 40 state attorneys general = pay states $368.5 billion over 25 years, end many
forms of advertising, and accept FDA oversight of their product → hopes to achieve
protection against future lawsuits
- June 1997 signing - clear to public-health lobby (White House and Congress - people that got
to legislate settlement into law) = too nice of a deal
o nine months after signing the agreement - John McCain, Arizona Republican -
introduced bill that would double the tax on a pack of cigarettes proposed in the
settlement with the states → Goldstone pullout
- McCain's Commerce Committee stripped Big Tobacco's lobbyist from the bill-writing
process = I don't understand why you are pulling out
o we need industry cooperation though
o the goal is to cut rate of teen smoking not raising tax revenue = Clinton get Goldstone
back
Goldstone:
- convince American smokers that Congress is trying to oppress them with new taxes
- the slowdown in momentum is the result of $50 million of advertising by the tobacco
companies
Geoffrey C. Bible - CEO Philip Morris
- "what do you think smokers would do if they didn't smoke? - beat wife, drive fast"
- fighting for market share in low shirking business - but meet regularity, discuss common
strategy because usually are all attacked together
o e.g. unanimous decision on several key issues in a recent state anti-tobacco case in
Minnesota - settle for 6.5 bill
- fought war for freedom - freedom to choose argument
o ideas that individuals are influencing the whole nation (Dr. Koop and Dr. David
Kessler - former Commissioner of the FDA)
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Description
Big Tobacco Steve F. Goldstone - CEO - RJR Nabisco Holding Corporation (owns R.J. Reynolds) - oversee production of Camels, Winstons, and Dorals - pushing drugs to children - argue that his company never manipulated the nicotine levels in cigarettes - argue that never marketed its products to teenagers - argue never thought Joe Camel would be attractive to 5 year olds - hero: legislate his industry into oblivion without his help - pulling out was not a completely rash action because CEO knew Republican Congress's election-year conversion to anti-tobacco cause Congress: - tax increase on tobacco? - allow Food and Drug Administration regulate the nicotine out of cigarettes Wall Street: - tobacco companies = Sloan-Kettering views smoking RJR is highly leveraged company, and its stock price is so depressed that the company's market cap-- the total value of all outstanding shares is actually exceeded by its debt - informing shareholders that this is a "slow and manageable decline in an increasingly obsolete industry" OUTCOME - Goldstone + 40 state attorneys general = pay states $368.5 billion over 25 years, end many forms of advertising, and accept FDA oversight of their product hopes to achieve protection against future lawsuits - June 1997 signing - clear to public-health lobby (White House and Congress - people that got to legislate settlement into law) = too nice of a deal o nine months after signing the agreement - John McCain, Arizona Republican - introduced bill that would double the tax on a pack of cigarettes proposed in the settlement with the states Goldstone pullout - McCain's Commerce Committee stripped Big Tobacco's lobbyist from the bill-writing process = I don't understand why you are pulling out o we need industry cooperation though o the goal is to cut rate of teen smoking not raising tax revenue = Clinton get Goldstone back Goldstone: - convince American smokers that Congress is trying to oppress them with new taxes - the slowdown in momentum is the result of $50 million of advertising by the tobacco companies Geoffrey C. Bible - CEO Philip Morris - "what do you think smokers would do if they didn't smoke? - beat wife, drive fast" - fighting for market share in low shirking business - but meet regularity, discuss common strategy because usually are all attacked together o e.g. unanimous decision on several key issues in a recent state anti-tobacco case in Minnesota - settle for 6.5 bill - fought war for freedom - freedom to choose argument o ideas that individuals are influencing the whole nation (Dr. Koop and Dr. David Kessler - former Commissioner of the FDA) Tisch - - irrational vilification (deflaming) of a legal industry - using the children's crusade as a cover for huge tax grab settle between the tobacco industry and state attorneys general - industry's executive see as a way out (their legal troubles) - public health = see as change to leverage the industry's help to reduce youth smoking - retrospect - not let state attorney general + the plaintiff lawyers to sue tobacco industry and dictate the terms of the deal critics of the settles within the industry say the companies would have been better off staying in the court system Goldstone: "what is the point of producing earnings if nobody puts a value on them? We're getting Pyrrhic victories in these cases, because nobody is putting value on our earnings" revenue machine but the stock market not realizing this - since 1964 when first Surgeon general's report on smoking and health was issued - anti- tobacco lobby slowly gaining strength - exploitation of fears about secondhand smoke - tobacco = public menace (threat) private choice - 1994 - 7 exec. testifying before Congress - told country that nicotine was not an addictive drug [FDA Commissioner, David Kessler - adult smoker pick up habit by age 18, convincing Clinton Administration to define smoking adult choice but = pediatric disease] - early 1996 Goldstone floated the idea of a comprehensive settlement in a pair of newspaper interviews; tackle all the states at once OUTCOME - Tobacco's adversaries (opponent) under Mississippi Attorney Mike Moore - after 100 days closed-door talks - deal: companies voluntarily restrict many forms
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