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Reynolds rolls out goals
Journal Photos by Walt Unks
About 120 people supporting farmworker rights protest outside Reynolds American during the annual shareholders’ meeting.
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Published: May 7, 2008
Reynolds American Inc. rolled out its first report on corporate social responsibility at its annual shareholders' meeting yesterday, focusing on seven areas of commitment.
The areas, which Reynolds called "planks," are environmental sustainability; supplier responsibility; community and civic engagement; employee responsibility; youth-tobacco prevention; corporate social responsibility; and harm reduction and product integrity.
"What has become abundantly clear to us is that corporate social responsibility is not a program, nor a report, but a way of doing business," Susan Ivey, the chairwoman and chief executive of Reynolds, said to about 100 shareholders, company officials and employees.
"It is a prism through which potential actions can be viewed to better understand the perspectives of multiple stakeholder groups," Ivey said.
However, Reynolds indicated that it would take its time and chart its own course in implementing the goals of its report. For example, the board of directors did not support three shareholder proposals with social-responsibility requests: protocols for rights for tobacco-farm workers; endorsing principles for health-care reform; and a pledge to develop a no-nicotine cigarette. Shareholders soundly defeated each proposal.
Reynolds' deliberate approach, particularly on supplier responsibility and youth-tobacco prevention, disappointed two groups that spoke during the meeting and protested outside the Reynolds Building.
The Farm Labor Organizing Committee, which had about 125 participants at its second local protest since October, is urging Reynolds to use its clout to get tobacco growers to provide better wages and living conditions for field workers.
In 1999, the committee called for a boycott of another North Carolina company, the Mt. Olive Pickle Co. Inc., that ended in 2004 when Mt. Olive signed a collective-bargaining contract that covered workers who picked the cucumbers for farmers who supplied the company.
Ivey said that even though Reynolds would not negotiate a collective-bargaining contract with the labor committee, it would work to make sure "that key suppliers comply with applicable laws and adhere to responsible practices."
But the Rev. Michael Crosby of the Interfaith Center on Corporate Responsibility, said that Reynolds must deal with the fact that as many as 20,000 illegal immigrants may be working in tobacco fields with little, if any, workers' rights.
Ivey said that 2007 "was another strong year," with diluted earnings up 8 percent. She said that the company would focus in 2008 on growth within Reynolds Tobacco's base businesses, increasing sales of its "super premium" cigarette and its smokeless brands, and looking for opportunities to expand internationally and through deals.
The second protest group featured about 50 youth participants rallying against Reynolds' marketing strategies, particularly its Camel No. 9 style that's aimed at female smokers. The coalition of youth groups targeted Reynolds for the first time after focusing on Philip Morris USA, the largest U.S. tobacco manufacturer.
Ivey said that R.J. Reynolds Tobacco Co. has recently updated the youth tobacco-use-prevention materials it has been providing to middle schools for 15 years.
"Demonstrating such programs' effectiveness is encouraged by the federal government, and I'm pleased to report that R.J. Reynolds' program tested well," Ivey said.
But the coalition said that the Camel No. 9 advertising -- described by the company as carrying "a fun and irreverent attitude" -- is influencing too many girls.
The Camel brand extension began receiving criticism from anti-smoking groups within weeks of its January 2007 debut, particularly because of its fuchsia and teal packaging and ad placements in 11 women's magazines.
Reynolds said last November that it would not advertise its cigarette brands in newspapers and consumer magazines in 2008.
"The 14- to 19-year-old group looks up to young adult-female consumers," said Morgan Wittman, a student at Jordan High School in Durham and a representative of North Carolina's Youth Empowered Solutions.
"The preteens look up to the 14- to 19-year-old group, and the tobacco companies know all this," Wittman said. "Ending the tobacco epidemic requires that tobacco companies stop recruiting a new generation of customers."
Ivey reiterated Reynolds' position that any Food and Drug Administration regulation of the tobacco industry must allow the company to market such products as smokeless tobacco and snuffs as having reduced risks for disease when compared with cigarettes.
"It is my hope that, as a nation, we will not waste another decade pursuing an abstinence-only approach to tobacco use," she said. "Public policies that are impractical, unrealistic and potentially misleading to consumers will do little to advance real efforts to reduce the harm caused by tobacco."
Shareholders re-elected Betsy Atkins, Nana Mensah and John Zillmer as directors for three years and Lionel Nowell III for two years. Thomas Wainert was named by the board as its lead director. The company also declared a quarterly cash dividend of 85 cents a share. It is payable July 1 to shareholders registered on June 10.
■ Richard Craver can be reached at 727-7376 or at rcraver@wsjournal.com.
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