Who Am I? The leading nicotine delivery company in the U.S. The leading nicotine delivery company in the U.S. The company with the largest ad budget devoted.

Who Am I?Who Am I?

The leading nicotine delivery company in The leading nicotine delivery company in the U.S.the U.S.

The company with the largest ad budget The company with the largest ad budget devoted to delivering the message that devoted to delivering the message that smoking is addictivesmoking is addictive

The company with the largest ad budget The company with the largest ad budget devoted to delivering the message that devoted to delivering the message that there is no such thing as a safe cigarettethere is no such thing as a safe cigarette

Who Am I?Who Am I?

A company that has publicly called A company that has publicly called on Hollywood to edit the smoking of on Hollywood to edit the smoking of cigarettes out of moviescigarettes out of movies

A company viewed by consumers as A company viewed by consumers as a credible messenger for delivering a credible messenger for delivering information about the health effects information about the health effects of smokingof smoking

Who Am I?Who Am I?

Who Am I?Who Am I?

Motivations Behind the Philip Motivations Behind the Philip Morris Corporate Social Morris Corporate Social

Responsibility Program: A Look Responsibility Program: A Look at the Internal Philip Morris at the Internal Philip Morris

DocumentsDocuments

Mitch ZellerMitch ZellerPinneyPinneyAssociatesAssociates

University of MarylandUniversity of MarylandSchool of LawSchool of LawApril 20, 2007April 20, 2007

PART ONEPART ONE

SOME RECENT HISTORYSOME RECENT HISTORY

Philip Morris: From the Good Old Philip Morris: From the Good Old Days to the Bad Old Days…and Days to the Bad Old Days…and

Back?Back? PM had been the Number 2 “most PM had been the Number 2 “most

respected” company in 1990 on Fortune respected” company in 1990 on Fortune Magazine’s listMagazine’s list

By 1995 they were Number By 1995 they were Number 202202 How did it happen?How did it happen? What did PM choose to do to transform its What did PM choose to do to transform its

image?image? What are the results of this What are the results of this

transformation?transformation?

Philip Morris: From the Good Philip Morris: From the Good Old Days to the Bad Old DaysOld Days to the Bad Old Days

Many factors and a confluence of Many factors and a confluence of events contributed to the declineevents contributed to the decline

Number One: the unforgettable Number One: the unforgettable image of the 7 CEOs in 1994 image of the 7 CEOs in 1994 swearing under oath to Congress swearing under oath to Congress that they did not believe nicotine was that they did not believe nicotine was addictiveaddictive

They Became Corporate They Became Corporate Pariahs and Were Ridiculed Pariahs and Were Ridiculed

and Mockedand Mocked

Philip Morris: From the Good Philip Morris: From the Good Old Days to the Bad Old DaysOld Days to the Bad Old Days

Other factors that contributed to the Other factors that contributed to the decline:decline: WhistleblowersWhistleblowers Document disclosureDocument disclosure FDA investigationFDA investigation Non-stop bad pressNon-stop bad press Private lawsuitsPrivate lawsuits Sued by every state, including North Sued by every state, including North

Carolina, Virginia, and KentuckyCarolina, Virginia, and Kentucky

PART TWOPART TWO

THE IMAGE CHANGING THE IMAGE CHANGING EFFORTEFFORT

What PM Aspires To:What PM Aspires To:“Societal Alignment”“Societal Alignment”

““Societal Alignment means meeting or Societal Alignment means meeting or exceeding society’s expectations of us as a exceeding society’s expectations of us as a responsible manufacturer and marketer of all responsible manufacturer and marketer of all our products, especially those that carry our products, especially those that carry significant health risks.”significant health risks.”

““We have also become more certain than ever We have also become more certain than ever before about our corporate affairs mission – to before about our corporate affairs mission – to shape a regulatory and attitudinal environment shape a regulatory and attitudinal environment that helps each unit of the company achieve its that helps each unit of the company achieve its business objectives.” business objectives.” (6/11/01 PM Doc; Bates (6/11/01 PM Doc; Bates 2080951609)2080951609)

What Success Would Look What Success Would Look LikeLike

““Corporate normalcyCorporate normalcy so that we can so that we can operate our businesses in a more operate our businesses in a more stable and predictable way, in an stable and predictable way, in an environment where our credibility has environment where our credibility has improved, our motives are no longer improved, our motives are no longer automatically suspect, our actions are automatically suspect, our actions are not always criticized and the mistrust not always criticized and the mistrust and anger have diminished.” and anger have diminished.” (6/11/01 PM (6/11/01 PM Doc; Bates 2080951609)Doc; Bates 2080951609)

The ApproachThe Approach

PM sought to create “the foundation PM sought to create “the foundation for credible, sustainable image for credible, sustainable image enhancement… [through] enhancement… [through] transparency and action.” transparency and action.” (6/11/01 PM Doc; (6/11/01 PM Doc; Bates 2080951609)Bates 2080951609)

As part of this strategy, PM sought to As part of this strategy, PM sought to be the industry leader on public policy be the industry leader on public policy issues important to its operating issues important to its operating companies.companies.

Target AudiencesTarget Audiences Minorities Minorities Government officialsGovernment officials Business leadersBusiness leaders MediaMedia Opinion leadersOpinion leaders Agricultural organizationsAgricultural organizations UnionsUnions Special interest groupsSpecial interest groups ConsumersConsumers Financial analystsFinancial analysts PM employeesPM employees

Target AudiencesTarget Audiences Minorities Minorities Government officials Government officials ** Business leadersBusiness leaders Media Media ** Opinion leadersOpinion leaders Agricultural organizationsAgricultural organizations UnionsUnions Special interest groupsSpecial interest groups ConsumersConsumers Financial analysts Financial analysts ** PM employees PM employees **

(David Sylvia, Altria Director of External (David Sylvia, Altria Director of External Communications, 2/19/04) Communications, 2/19/04)

A Key Tactic: Support Product A Key Tactic: Support Product RegulationRegulation

This strategic decision, not embraced by This strategic decision, not embraced by other tobacco companies, gave PM a other tobacco companies, gave PM a unique and differentiating opportunity to unique and differentiating opportunity to advance its repositioning efforts.advance its repositioning efforts.

Referring to the Framework Convention, Referring to the Framework Convention, PM noted that “[b]y accepting credible and PM noted that “[b]y accepting credible and meaningful proposals, we are improving meaningful proposals, we are improving our own credibility as well as our ability to our own credibility as well as our ability to sit at the table with others as we sit at the table with others as we collectively resolve these and other collectively resolve these and other important issues affecting our business.” important issues affecting our business.” (6/11/01 PM Doc; Bates 2080951609)(6/11/01 PM Doc; Bates 2080951609)

A Key Tactic: Enhanced A Key Tactic: Enhanced Corporate Social ResponsibilityCorporate Social Responsibility

The goal of this effort was to “help us reach out to society The goal of this effort was to “help us reach out to society and enter into discussions with others in order to learn more and enter into discussions with others in order to learn more about society’s expectations of us, so we can further adjust about society’s expectations of us, so we can further adjust our behaviors, and avoid the isolation and pariah status that our behaviors, and avoid the isolation and pariah status that some would like to impose on us.” some would like to impose on us.” (6/11/01 PM Doc; Bates (6/11/01 PM Doc; Bates 2080951609)2080951609)

Program components included:Program components included: A company-wide issues management teamA company-wide issues management team Youth smoking preventionYouth smoking prevention Corporate giving (domestic violence, hunger, and disaster Corporate giving (domestic violence, hunger, and disaster

relief)relief) Grants to organizations devoted to civic improvement, Grants to organizations devoted to civic improvement,

conservation and environment, culture and humanities, conservation and environment, culture and humanities, education, and health and welfareeducation, and health and welfare

Increased purchasing from minority and women-owned Increased purchasing from minority and women-owned suppliers suppliers

A Key Tactic: Engage in A Key Tactic: Engage in DialogueDialogue

In a 1999 interview with the Los In a 1999 interview with the Los Angeles Angeles TimesTimes, Steve Parrish (Altria , Steve Parrish (Altria Senior VP for Corporate Affairs) said, Senior VP for Corporate Affairs) said, “We have not been as open and “We have not been as open and accessible to people in the media accessible to people in the media and the public as we need to be.” and the public as we need to be.” (L.A. Times 10/13/99; Bates 2072366015A/6017)(L.A. Times 10/13/99; Bates 2072366015A/6017)

A Key Tactic: Candid Admissions A Key Tactic: Candid Admissions Regarding Credibility and TrustRegarding Credibility and Trust

““We went from being one of the most We went from being one of the most respected corporations in America to being respected corporations in America to being reviled, particularly because of the reviled, particularly because of the tobacco business.“ (Mike Pfeil) tobacco business.“ (Mike Pfeil) (1/19/04 PR (1/19/04 PR Week article)Week article)

““I first acknowledge the role that the I first acknowledge the role that the tobacco industry has played in generating tobacco industry has played in generating an unprecedented level of mistrust within an unprecedented level of mistrust within the public health community.” (Steve the public health community.” (Steve Parrish) Parrish) (Yale Journal of Health Policy, Winter 2002)

A Key Tactic: Candid Admissions A Key Tactic: Candid Admissions Regarding Credibility and TrustRegarding Credibility and Trust

"The mistrust of the tobacco industry has become so intense, there are no voluntary steps that Philip Morris could take to deal with that mistrust.“ (Steve Parrish)

“Put simply, ours was a culture of arrogance, bred by insularity and enabled by spectacular business success…There was a bunker mentality, an ‘us-against-them’ attitude, a belief that anyone who disagreed with us was an enemy out to destroy us.” (Steve Parrish) (Yale Journal of Health Policy, Winter 2002)

Early Results: Improved Early Results: Improved Favorability RatingsFavorability Ratings

Favorable Favorable OpinionOpinion

Unfavorable Unfavorable

OpinionOpinion No opinion or No opinion or Never Heard Never Heard

of PMof PM

SeptembeSeptember 1999 r 1999

26%26% 41%41% 32%32%

December December 20002000

39%39% 37%37% 23%23%

ChangeChange +13%+13% -4%-4% -9%-9%

Early Results: Improved Public Early Results: Improved Public PerceptionPerception

61 percent agreed that PM is changing 61 percent agreed that PM is changing for the better (+26% since 1999)for the better (+26% since 1999)

60 percent agreed that PM is more 60 percent agreed that PM is more open (+18%)open (+18%)

60 percent agreed that PM is a more 60 percent agreed that PM is a more responsible corporate citizen (+21%) responsible corporate citizen (+21%) (6/11/01 PM Doc; Bates 2080951609)(6/11/01 PM Doc; Bates 2080951609)

PART THREEPART THREE

ONE EXECUTION OF THE ONE EXECUTION OF THE CORPORATE RESPONSIBILITY CORPORATE RESPONSIBILITY

EFFORT: COMMUNICATION EFFORT: COMMUNICATION STRATEGY FOR THE “REDUCED STRATEGY FOR THE “REDUCED

EXPOSURE” CIGARETTEEXPOSURE” CIGARETTE

PM “Best Practices”PM “Best Practices”

In response to the concerns of the public health In response to the concerns of the public health community, PM devised Best Practices to guide the community, PM devised Best Practices to guide the development and communication of efforts on the development and communication of efforts on the so-called “reduced exposure” or “reduced risk” so-called “reduced exposure” or “reduced risk” cigarette.cigarette.

One of PM’s “Overall strategies” is to “[m]aximize One of PM’s “Overall strategies” is to “[m]aximize integration of scientific communication with integration of scientific communication with marketing strategies.” marketing strategies.” (3/3/02 PM Doc; Bates 2067454933)(3/3/02 PM Doc; Bates 2067454933)

PM notes that such messages “provide opportunities PM notes that such messages “provide opportunities to combine product information with health to combine product information with health acknowledgments, users instructions, YSP [Youth acknowledgments, users instructions, YSP [Youth Smoking Prevention], responsible marketing and our Smoking Prevention], responsible marketing and our commitment towards reduced risk in a regulatory commitment towards reduced risk in a regulatory framework.” framework.” (3/3/02 PM Doc; Bates 2067454933)(3/3/02 PM Doc; Bates 2067454933)

Unregulated Marketplace: Unregulated Marketplace: Need for OutreachNeed for Outreach

Engagement with third parties would give Engagement with third parties would give PM “[c]redibility in the absence of PM “[c]redibility in the absence of regulation.” regulation.” (3/13/02 PM Doc; Bates 206733903)(3/13/02 PM Doc; Bates 206733903)

““In the absence of comprehensive In the absence of comprehensive regulation PMUSA is looking to use external regulation PMUSA is looking to use external stakeholders to bring credibility to the stakeholders to bring credibility to the potential PREP [reduced exposure] claim potential PREP [reduced exposure] claim process.” process.” (6/3/02 PM Doc; Bates 2505945041)(6/3/02 PM Doc; Bates 2505945041)

This would also enhance their overall This would also enhance their overall objective of being perceived as a objective of being perceived as a responsible marketer.responsible marketer.

Perception is VERY important…Perception is VERY important…

Measurements of SuccessMeasurements of Success

First measure of success is “increas[ing] the First measure of success is “increas[ing] the percentage of people in our target audiences that percentage of people in our target audiences that will state that:will state that: PMUSA is basing their product exposure claims on PMUSA is basing their product exposure claims on

credible and relevant scientific datacredible and relevant scientific data PMUSA is credible in what it claims on PREPsPMUSA is credible in what it claims on PREPs PMUSA is acting effectively on key tobacco issues PMUSA is acting effectively on key tobacco issues

such as exposure reduction of smokerssuch as exposure reduction of smokers PMUSA is becoming more open, transparent, and PMUSA is becoming more open, transparent, and

cooperative”cooperative” PM’s second measure of success is that the PM’s second measure of success is that the

company’s “process of responsible reduced company’s “process of responsible reduced exposure claims is evaluated and recognized by exposure claims is evaluated and recognized by policy makers.” policy makers.” (3/3/02 PM Doc; Bates 2067454933)(3/3/02 PM Doc; Bates 2067454933)

Relevance of the PM Risk Relevance of the PM Risk Communication Program to Communication Program to

CSR EvaluationCSR Evaluation PM may or may not succeed commercially when it PM may or may not succeed commercially when it

eventually launches one of these products eventually launches one of these products nationally. But the measures of success nationally. But the measures of success identified by PM go beyond traditional notions of identified by PM go beyond traditional notions of short-term commercial success.short-term commercial success.

It is all about looking responsible.It is all about looking responsible. PM intends to use reduced exposure/risk products PM intends to use reduced exposure/risk products

as part of a broader and longer-term effort to re-as part of a broader and longer-term effort to re-shape the public’s perception of the company as shape the public’s perception of the company as a responsible corporate citizen, and to make their a responsible corporate citizen, and to make their own employees feel better about the company own employees feel better about the company they work for.they work for.

Are PM/Altria’s Efforts Are PM/Altria’s Efforts Working?Working?

Fortune Magazine 2003 Most Fortune Magazine 2003 Most Admired Companies for Social Admired Companies for Social ResponsibilityResponsibility

Out of 587 companies, Altria placed Out of 587 companies, Altria placed Number Number 44……

……Enron was Number 586Enron was Number 586