III. The Tobacco-Divestment Question

  A. What features of tobacco products and what activities of the tobacco industry warrant singling out tobacco securities for potential divestment?

An important initial question is why, of all the many industries whose products or manufacturing processes or employment practices might raise objections, the University of Michigan has singled out tobacco companies for special scrutiny? What distinguishes tobacco companies from other companies? If no company or industry is perfect, why pick on tobacco? We answer this question in two parts. The first has to do with the nature of the tobacco product itself. The second has to do with the conduct of the companies, the way they have gone about their business.

    1. The nature of tobacco products

Tobacco companies make a product that is unique in its capacity to cause death in its intended use. According to the Centers for Disease Control and Prevention [CDC], between the period 1990 to 1994, smoking caused roughly 430,000 deaths per year in the United States, or one in every five deaths. 4 Tobacco use kills more people in this country each year than alcohol, illicit drugs, automobile accidents, violent crime, and AIDs combined. 5 Furthermore, it is estimated that, worldwide, more than 4 million people die annually from tobacco use, a number that is expected to increase to 10 million by 2030, owing principally to the anticipated expansion of the cigarette market in developing countries. 6 It is also estimated that, globally, smoking will cause 150 million deaths in the first quarter and another 300 million in the second quarter of the new century. 7 The CDC nicely summarizes the current state of the overwhelming scientific consensus regarding the health effects of tobacco use: "[I]t is now well documented that smoking can cause chronic lung disease, coronary heart disease, and stroke, as well as cancer of the lung, larynx, esophagus, mouth, and bladder" and can contribute to cancers of the cervix, pancreas, and kidney. In addition, smokeless tobacco and cigars have been found to contribute to lung, larynx, esophageal, and oral cancer. And smoking causes nearly 90 percent of all lung-cancer deaths and has made lung cancer, which is the cause of 36 percent of cancer deaths, the leading cause of cancer mortality in both men and women.

Moreover, the risks of smoking are not limited to the smoker. The evidence continues to accumulate demonstrating the causal connection between "passive" or "sidestream" cigarette smoke and various serious diseases, including lung cancer, other respiratory ailments, and heart disease. At least since the Surgeon General's Report on this question in 1986, passive smoke has been linked to lung cancer in adults and serious respiratory ailments in children. 8 Then, in an influential report, the U.S. Environmental Protection Agency [EPA] concluded that passive smoke is responsible annually for 3000 lung-cancer deaths, and between 150,000 and 300,000 lower respiratory ailments in children. 9 In the years since that report, the findings with respect to lung cancer and respiratory ailments caused by passive smoke have been confirmed in numerous studies. Moreover, a strong link between passive smoke and heart disease has now been established. According to the recent report from the California Environmental Protection Agency, compiling the results of a number of studies, 62,000 coronary-heart-disease deaths per year are attributable to passive smoke. 10

Not only is tobacco by far the deadliest product on earth (according to the current overwhelming scientific consensus), it is, because of the effects of nicotine, also one of the most addictive. It is now well documented that nicotine has addictive properties similar to those found in other drugs, such as heroin and cocaine. 11 The following discussion, which paraphrases the conclusions of a 1995 FDA report, 12 provides some insight into the addictive properties of nicotine. First, tobacco users consume tobacco products regularly and compulsively. 13 Second, the failure rate of those who attempt to stop or reduce their smoking is dramatic, even in the face of life-threatening tobacco-related illnesses. For example, although nearly 15 million people, almost one-third of all smokers, in the United States try to quit smoking each year, only about 10 percent of those would-be quitters (or 3 percent of all smokers) achieve long-term success. Indeed, cigarettes and smokeless tobacco products may be the only major consumer product that a majority of users want to quit using, but cannot. 14 Moreover, tobacco use persists despite its harmful and often deadly consequences. Third, consumers who abstain from tobacco products experience withdrawal symptoms; and nicotine has been shown to produce tolerance (the lessening of the desired effect over time or the need for higher doses to produce the same effect) among tobacco users. Given these findings, nicotine clearly satisfies the classic criteria for an addictive substance. 15 Indeed, the FDA report concludes that "a large body of compelling and widely accepted scientific evidence now exists that establishes that nicotine is addictive."

All of these facts about tobacco products-the ill-health effects and the addictive qualities-are especially troublesome when one considers that most nicotine addiction, and thus most long-term smoking, begins when smokers are teenagers, at an age when they are least likely to understand the full, long-term implications of their decision to start smoking. According to the CDC, 82 percent of adult smokers in this country began smoking before they reached the age of 18. 16 Similarly, according to several studies summarized in a 1994 Surgeon General's report, of people who have ever smoked daily, around 70 percent were smoking daily by the time they reached the age of 18. 17 And according to the Monitoring the Future study, conducted by the University of Michigan's Institute for Social Research, although smoking among teenagers appears to have declined slightly over the last two years, the drop has been quite small; and the levels of teenage smoking remain near their all-time-high levels in 1996 and 1997. 18 Finally, consider the following much-quoted statement from Secretary of Health and Human Services Donna Shalala:

    Today, nearly 3,000 young people across our country will begin smoking regularly. Of these 3,000 young people, 1,000 will lose that gamble to the diseases caused by smoking. The net effect of this is that among children living in America today, 5 million will die an early, preventable death because of a decision made as a child. 19

Not only is tobacco by far the deadliest product on earth, not only is its deadly effect felt most often by adults who became regular smokers when they were children, but also tobacco is deadly in its normal and intended use. Put differently, the problem is not that smokers are misusing tobacco products; that is, they are not using tobacco products in a manner contrary to the intentions of the manufacturer. They are using those products precisely as the manufacturer intends that they be used. They are smoking lots of cigarettes over long periods of time. And it is that pattern of use which kills. 20 The problem, of course, is that there is no safe way to smoke a cigarette, at least as cigarettes are currently designed.

    2. The conduct of the tobacco industry

In 1954 the major tobacco companies placed a full-page advertisement in 448 newspapers across the country. The ad, entitled "A Frank Statement to Cigarette Smokers," stated that there was no proof that cigarettes cause lung cancer and, further, included the following assurance from the tobacco industry:

    We accept an interest in people's health as a basic responsibility, paramount to every other consideration in our business.... We always have and always will cooperate closely with those whose task it is to safeguard the public health.... We are pledging aid and assistance to the research effort into all phases of tobacco use and health. 21

In conjunction with this pledge, the industry founded the Tobacco Industry Research Committee (later called the Council for Tobacco Research) ostensibly for the purpose of fulfilling the promise laid out in the "Frank Statement." However, according to the overwhelming evidence that has come to light in recent years, which will be summarized in this Section of the report, it is now clear that the industry never had any intention of fulfilling the above-quoted commitment to the public's health and that, in fact, the Research Council was formed as a public relations front designed to placate smokers' concerns about the health effects of smoking. Indeed, according to allegations in many of the state Medicaid suits as well as in the recently filed federal suit against the tobacco industry, both the Frank Statement and the creation of the Research Council were parts of a unified "enterprise" on the part of the tobacco industry to suppress research about the health hazards of tobacco use. 22

Since its first public statement about the safety of cigarette smoking back in 1954, the tobacco industry has, until very recently, consistently and adamantly taken the position that (a) there is no conclusive proof that smoking causes diseases such as cancer and heart disease; (b) smoking is not addictive; and (c) tobacco companies are committed to determining the scientific truth about the health effects of tobacco, both by conducting internal research and by funding external research. 23 As discussed in Section A above, there has long been little doubt in the scientific community that smoking causes numerous diseases and that nicotine is powerfully addictive. Given such a general scientific consensus, it seems reasonable to assume that the industry must have known those facts as well, despite their protestations to the contrary. Over the past five years, evidence has been disclosed indicating that, in fact, the industry has known these facts about their products for many years. As the result of the testimony of several "whistle blowers" (including ex-industry research scientists) and the internal tobacco-industry documents that have been made available, the last few years have produced considerable evidence to support the following conclusions:24

  arrow bullet At least by the early 1960s (and perhaps as early as the 1950s), the industry's own research revealed a causal connection between cigarette smoking and various diseases, including cancer and lung disease. During this same period, of course, independent researchers had come to the conclusion that smoking causes lung cancer, heart disease, and other respiratory ailments.25 Despite all of this research, however, the industry continued in all of its public statements to deny that any such causal link had been established.
  arrow bullet In the 1970s, tobacco companies concluded privately that the causal link between cigarette smoking and various diseases was no longer a matter of controversy-but was irrefutably established. However, all of the industry's public statements continued to deny any causal link.
  arrow bullet At some point in the 1970s and early 1980s, the tobacco companies not only stopped doing research into the health effects of tobacco use, they consciously decided not to disclose to the public the evidence that had previously been gathered establishing such a link. What's more, in some cases they even actively suppressed those findings by shipping files out of the country.
  arrow bullet Also by the early 1960s, the industry had developed a sophisticated understanding of the addictive properties of nicotine.26 The scientific community was slower to appreciate nicotine addiction. It was not until 1988 that the Surgeon General reported definitively that tobacco was addictive, that nicotine was the addictive agent, and that the addictive properties of nicotine were similar to those of heroin and cocaine. Throughout all of this, the tobacco industry consistently maintained publicly that nicotine is not addictive. In fact, in their infamous appearance before a House subcommittee in 1994, the chief executives of the top seven tobacco companies again testified specifically, and under oath, that they did not believe nicotine was addictive.
  arrow bullet The tobacco companies have long been able to, and regularly do, artificially enhance the level of nicotine in their products through patented techniques of genetic-engineering. The industry has now admitted this, although they continue to insist publicly that they enhance the nicotine levels (and refrain from eliminating nicotine altogether, which they could do) not to addict smokers or to maintain their addictions but to improve or maintain the "taste" of cigarettes.

There is also substantial evidence that tobacco companies have, for many years, focused their marketing efforts on children and have explicitly tried to get children hooked on smoking. This conclusion, which the industry continues to deny, is supported by the following quotations from internal tobacco industry documents, of which there are many more in the thousands of such documents found at various addresses on the world wide web:

  arrow bullet "Evidence is now available to indicate that the 14-18 year old group is an increasing segment of the smoking population. RJR-T must soon establish a successful new brand in this market if our position in the industry is to be maintained in the long run." From a 1976 RJR internal report entitled "Planned Assumptions and Forecast for the Period 1977-1986."
  arrow bullet "Today's teenager is tomorrow's potential regular customer, and the overwhelming majority of smokers first begin while still in their teens... The smoking patterns of teenagers are particularly important to Philip Morris." From a 1981 Philip Morris internal document.
  arrow bullet "The teenage years are also important because those are the years during which most smokers begin to smoke, the years in which initial brand selections are made, and the period in the life cycle in which conformity to peer group norms is greatest." From a 1975 Philip Morris memo entitled "The Decline in the Rate of Growth of Marlboro Red."
  arrow bullet "Smoking a cigarette for the beginner is a symbolic act. . . 'I am no longer my mother's child, I'm tough, I am an adventurer, I'm not square.' . . . As the force from the psychological symbolism subsides, the pharmacological effect takes over to sustain the habit. . . ." From a 1969 draft report to the Philip Morris Board of Directors.
  arrow bullet "[Project LF is a] wider-circumference nonmenthol cigarette targeted at young adult male smokers (primarily 13-24-year-old male Marlboro smokers)." From a 1987 RJR memo describing the Camel Wides brand, under the code name Project LF. Additional circumstantial evidence of the industry's focus on children is that 86 percent of the kids who smoke prefer the three most heavily advertised brands of cigarettes; whereas, only about one-third of adult smokers choose those brands.27

The revelations over the last few years about the industry's long history of egregious misconduct, of the sort sampled above, have spawned a massive new wave of litigation against tobacco companies. In addition to the individual suits that have long been brought by smokers and their families against tobacco companies, numerous groups of smokers as well as victims of second-hand smoke have banded together to bring class-action suits against the industry. Some of those suits continue to be litigated. Perhaps the most important development in tobacco litigation, however, is the series of lawsuits brought by the state attorneys general seeking reimbursement from the tobacco industry for the states' tobacco-related Medicaid expenses. Those suits were eventually settled under terms that, among other things, call for the big tobacco companies to pay the states roughly $246 billion over the next 25 years and impose some restrictions on tobacco-industry advertising (such as forbidding the use of cartoon characters, such as Joe Camel).28

Also relying on the recently released internal industry documents, the United States Department of Justice last September filed a civil lawsuit against the eight largest tobacco companies, as well as against the industry-run organizations-the Council for Tobacco Research (mentioned above) and the Tobacco Institute. This suit seeks recovery for the billions of dollars the federal government spends each year on smoking-related health care costs, which the complaint alleges to be in the neighborhood of $20 billion per year. The government's suit is based on three statutes: the Medical Care Recovery Act, the Medicare Secondary Payer Act, and the civil provisions of the Racketeer Influenced and Corrupt Organizations (RICO) statute. In the complaint, the government alleges, among other things, that the tobacco industry:

  arrow bullet made false and misleading statements to create a false controversy about whether smoking causes disease, even though they knew that smoking did cause disease;
  arrow bullet made false promises that they would undertake or sponsor research to determine whether smoking causes disease;
  arrow bullet sponsored research that was designed not to answer the question of whether smoking caused disease, promoted biased research that would assist in defending lawsuits brought by injured smokers, and suppressed research that suggested that smoking causes disease;
  arrow bullet denied that nicotine was addictive;
  arrow bullet failed to warn consumers about the effects of smoking, including that cigarettes are addictive;
  arrow bullet refrained from developing, testing, and marketing potentially less hazardous products; and,
  arrow bullet denied that they marketed and/or targeted products to children, although they actively sought to capture the youth market.29

How the court will rule on the federal government's claims-or whether the parties will settle before the case reaches trial-remains to be seen. However, it is clear that the lawyers in the Department of Justice, after combing through all of the tobacco-industry documents now available, have concluded that the above-listed allegations are true.30

    3. Conclusion

In sum, tobacco companies can be distinguished from other companies by the nature of the product they make and sell-including the unrivaled death toll attributable to tobacco use, the powerful addictive qualities of nicotine, the fact that most smokers become addicted when they are teenagers, and the fact that cigarettes are deadly when put to their normal use. In addition, based on what has been learned over the past few years from internal industry documents, it is clear that the tobacco industry over the past 45 years has engaged in dishonest, deceptive, and generally reprehensible conduct unparalleled in the history of American business and at a cost of millions of lives. Thus, given the evidence reviewed in this part, there is little mystery why the tobacco industry was singled out for this committee's scrutiny.

  B. Given the nature of the tobacco companies' products and activities, is the ownership of their securities "antithetical to the core missions of the University of Michigan" such that divestment is warranted?

The committee found it useful to subdivide this question into two parts: First, are the attributes of tobacco products and the activities of the industry antithetical to the core missions of the University? Second, is the ownership of securities in such companies antithetical to the core missions of the University such that divestment is called for? We also address separately, and briefly, the question whether some response other than divestment might be appropriate as well as the slippery-slope concern, which is often raised in discussions of divestment.

    1. Are the attributes of tobacco products and the activities of the industry antithetical to the core missions of the University?

We had little difficulty concluding that the answer to this question is unequivocally yes. The core missions of the University, as described in the University's mission statement and by-laws, are: teaching, research, and service. In our view, the tobacco companies' activities can easily be seen as antithetical to all of those missions. If there is anything that unifies the three core missions, it is the pursuit and dissemination of truth and knowledge: We conduct research to find truth and create knowledge; we teach as a means of disseminating that knowledge, encouraging its pursuit, and instilling respect for its value; and we put that knowledge to public use in various areas of service to the community.

The brazen dishonesty of the tobacco industry for so many years about a matter of such enormous public-health significance is, in the view of this committee, unquestionably antithetical to the core missions of the University. The industry's refusal to reveal the results of its own research linking tobacco use and disease, its efforts actively to hide its own damning research results, its persistent public denials of any link between tobacco and disease (despite its knowledge to the contrary), and its cynical and hypocritical attempt for years to cloak itself with the mantle of scientific legitimacy combine to constitute the most blatant and deplorable contradiction of academic values by a single business or industry in modern history-again, at a cost of untold misery and death.

What's more, the actions of the tobacco industry, when coupled with the nature of tobacco products, are especially antithetical to the missions of this University, given our commitment to teaching, research, and service in the fields of health care and public health. The committee will not try to provide an exhaustive list of all the schools, colleges, and departments in this University that have, as part of their mission, the pursuit of some aspect of health care or public health. Nor will we offer a count of all the members of the University community who have devoted all or a portion of their careers to the pursuit of teaching, research, or service in those fields. But the list would be long, and the number would be large. In addition, Michigan has, as a central part of the University community, one of the great research and teaching hospitals in the world, whose central purpose, almost by definition, is teaching, research, and service for the benefit of human health.

Thus, when we realize that tobacco use has often been called the greatest human health disaster of the 20th century and continues in the new century to be considered "public health enemy number one," the phrase "antithetical to the core missions of the University" seems a profound understatement. We emphasize, however, that our conclusion on this point depends on the combination of the establishment beyond a scientific doubt of the harmful effects of tobacco use and the overwhelming evidence of dishonest conduct by the tobacco industry over many years in a manner that is directly contradictory to this University's most central values. In other words, without both of these elements, the committee would not have reached the conclusion that it did.

    2. Is the ownership of securities in such companies antithetical to the core missions of the University, such that divestment is called for?

The difficulty in the analysis comes when we ask the precise question that has been put to the committee: whether owning securities in tobacco companies is antithetical the core missions of the University. Normally ownership of a company's securities does not imply endorsement of that company's behavior. As discussed in Part I above, that conclusion follows from the sensible observation that no corporation can be perfect, even from the perspective of the University's "core missions," and therefore no investment can be pure. Indeed, every company in which we might conceivably invest could, at some point, do something that might be considered inconsistent with, or even antithetical to, the highest ideals of the University. Therefore, we are inevitably faced with questions of gravity and magnitude. For example, it seems likely that many companies in many different industries have on occasion been guilty of dishonest, even fraudulent, business practices, including dishonest or fraudulent commercial research activities that could be considered antithetical to the core academic values described above. However, for ownership of such a company to be antithetical to the University's core missions, the question of gravity or magnitude becomes essential.

In our view, to justify such a finding, the magnitude of both the misbehavior in question and the harm caused by that misbehavior must be so extreme that the company or industry would be considered a clear outlier in the corporate community. In our view, the evidence discussed in Part A, concerning the reprehensible nature of tobacco industry's conduct and the extraordinary harm caused by tobacco products, is sufficient to meet this magnitude test. Thus, the committee unanimously concludes that the ownership of tobacco securities is antithetical to the University's core missions such that divestment is called for. In Part IV below, we spell out precisely what we mean by "divestment."31 We emphasize again that our conclusion rests on the combination of the industry misbehavior and the irrefutable evidence of tobacco's harmful effects. Neither alone would be sufficient.

In reaching the conclusions just summarized, however, the committee was forced to address a number of difficult questions. For example, what about the fact that tobacco products and smoking are legal in this country? If our democratically elected government has decided that smoking should not be prohibited, or even seriously regulated (as is currently the case, with the exceptions of warning labels, television advertising, and sales to minor), why should the University feel the need to take a public stand against the tobacco companies? Although reasonable people could certainly disagree on this issue, we conclude that the current legal status of smoking should not be considered a decisive factor in our deliberations. Indeed, one could argue that it is irrelevant. The procedure that the Regents adopted for dealing with divestment-related issues presumably has application only in cases involving legal activities. That is, if smoking and tobacco-product manufacturing were illegal (in the sense of being completely prohibited under threat of criminal penalty), there would be no divestment issue, because there would be no tobacco securities. That is, it would be illegal for tobacco companies not only to exist, but to issue stock. And it would be illegal to own any interest in such companies, whatever form that interest might take. Thus, it is only with respect to companies that are engaged in legal activities, but activities that may be considered antithetical to the University's core missions, that the divestment issue arises.32

Moreover, although neither the use (by adults) nor the manufacture of tobacco products is illegal, it would be an overstatement to claim that our democratically elected government is indifferent or neutral with respect to the tobacco industry. The lawsuit that was recently filed by the Justice Department reveals that at least the federal government has determined that the tobacco companies themselves have been guilty of nearly criminal conduct. Although the Department decided not to pursue a criminal case against the industry, the allegations within the civil complaint (summarized above) are as close to alleging criminal activity as one can get without invoking the criminal label (and the higher standard of proof associated with a criminal prosecution). And the cases brought by the state attorneys general made similar allegations. Although for the purpose of determining liability, innocence is assumed until guilt is proven, the facts on which the allegations are based are not seriously in dispute. Indeed, we can go to various sites on the worldwide web and read the documents for ourselves. Passages from some of them are quoted above. What is important to remember is this: For the University of Michigan, the issue is not the criminality or even the civil liability of the companies; the issue is whether the industry's conduct (taken together with the inherent effects of tobacco use) is antithetical to the University's core missions. And we conclude that it is.

A second difficult question involves the recent efforts of some tobacco companies to polish their public images. For example, several tobacco-company executives have, when recently confronted with the documents of the sort quoted in the previous section, expressed regret that any such statements could ever have been made by employees of their companies. They further insist that those statements (whatever they say about the tobacco companies of old) do not accurately portray the current corporate culture at their tobacco companies.33 For another example, in late 1999, Philip Morris put on its corporate web site a statement regarding the health effects of smoking, a statement that explicitly acknowledges the scientific consensus that smoking causes disease.34 Specifically, Philip Morris now says "[t]here is an overwhelming medical and scientific consensus that cigarette smoking causes lung cancer, heart disease, emphysema and other serious diseases in smokers." Moreover, as to the question of addiction, Philip Morris now says that "[c]igarette smoking is addictive, as that term is most commonly used today. It can be very difficult to quit smoking but this should not deter smokers who want to quit from trying to do so."35

What are we to make of all this recent evidence of a "change of heart" within the industry? It could, for example, be argued that, whereas divestment might have been appropriate a few years ago, it no longer is, because the industry has mended its ways. In our view, however, the recent steps taken by the tobacco companies to polish their public images, even if taken at face value, are far too little and too late. That is, given the nature of tobacco products and given the industry's long history of dishonesty regarding the health effects of their products, we are unmoved by an eleventh-hour assertion that the companies have turned over a new leaf.

Moreover, we do not take the industry's recent assertions at face value. We regard it as significant that the industry's recent statements were made only after the incriminating documents were made public and after, largely as a result of those disclosures, the threat of bankrupting lawsuits became a serious possibility for the industry. We also regard it as significant that the industry has worded its recent "admissions" in a manner that can be (and has been) interpreted as cynical and manipulative. For example, Philip Morris's concession regarding the "overwhelming medical and scientific consensus" that smoking causes disease is not an admission that, in fact, smoking does cause those diseases. To the contrary, company executives have stated, when pressed, that they will continue to employ the same strategy in lawsuits against them that they have employed all along: denying that a causal relationship between smoking and disease has been proven.

In addition, the company's "official" statement on the web regarding this causal connection might be understood as an effort to enhance the industry's litigation position in future cases by strengthening the industry's so-called "assumption of risk" defense. Under the assumption-of-risk doctrine in products liability law, if an injured plaintiff is found to have known of the specific risk associated with a particular product and to have nevertheless voluntarily assumed that risk in using the product, the manufacturer of the product in question can escape tort liability. Thus, in future product-liability cases brought by or on behalf of individuals who started smoking after 1999, tobacco companies may, as a result of the Philip Morris web site, have a somewhat stronger argument that those individuals "assumed the risks" associated with smoking.

Interestingly, one can also interpret the industry's latest position on nicotine addiction to be consistent with an attempt to strengthen (or avoid weakening) the industry's assumption-of-risk defense. If juries around the country begin to take seriously the conclusion of the scientific community that nicotine has addictive properties similar to those of heroine and cocaine, the industry's assumption-of-risk defense weakens significantly. That is to say, if nicotine is that highly addictive, given that most long-term smokers get addicted to smoking when they are teenagers (when they are most likely to overestimate their own ability to overcome nicotine addiction and least able to make rational, long-term decisions about what sorts of life-shortening risks to "assume"), the tobacco industry's assumption-of-risk defense loses much of its force. Thus, it is likely no coincidence that Philip Morris, and apparently the rest of the industry, still do not concede that nicotine is addictive in the way that cocaine and heroine are addictive.

Finally, in deciding to take the industry's recent public posturing at less than face value, we were influenced by the fact that the industry has a long, well-documented history of successfully using its vaunted public-relations machinery not to produce real change (such as the reduction of smoking among teenagers) but to protect itself from the threat of lawsuits or serious regulatory restrictions.

For all these reasons, we view the industry's recent public relations efforts with skepticism and certainly not as exculpatory for all the harm they have caused. Although we concede that, in theory, the tobacco industry might someday so transform itself-that is, not only change the nature of its product but also its corporate culture-that the concerns prompting this report would be reduced or even eliminated, that time has certainly not yet arrived and does not, to us, appear to lie in the foreseeable future.

The third difficulty presented by the question whether ownership of tobacco securities is antithetical to the University's core missions is the fact that many members of the Michigan community, including many current employees of the University, are smokers. In addition, there are some in the Michigan community who regard divestment from tobacco stocks as inappropriate. Would the University, by taking a stand on the issue of tobacco (either through divestment or some other action), be in effect silencing those people or encroaching on the rights of the smokers? After all, a core value of the University certainly is the freedom of expression, especially the freedom to hold and express controversial views; and the last thing the University should do is to discourage debate or freedom of thought on these issues. However, we see nothing inconsistent with the University's, on one hand, deciding that ownership of securities in tobacco companies is antithetical to its core missions and, on the other hand, maintaining an environment of free exchange of ideas on the tobacco issue. Surely, if the University's official smoking policy-which bans smoking in all University facilities (including parking structures and University vehicles) and even bans smoking within 50 feet of outer door entrances-is not considered a problem from the perspective of squelching debate on tobacco-related issues, a decision by the Regents that the University will no longer profit from the sales of cigarettes would not present insurmountable freedom-of-expression difficulties. For example, that the University has taken a strong position regarding affirmative action is not intended to, nor does it in fact, quell discussions of the merits of affirmative action in classrooms or elsewhere in the University community.

In sum, notwithstanding these difficult issues, we conclude that owning securities in tobacco companies is antithetical to the core missions of the University.

    3. What about responses other than divestment?

As the charge framed the question to the committee, the conclusion just stated would seem to imply necessarily a recommendation to divest. However, we assume that the Regents are also interested in our views as to whether, given our conclusions regarding the "core missions question," some response by the University other than divestment might be more appropriate.36 Put differently, even if the conclusion is reached that ownership of tobacco securities is antithetical to the University's core missions, should the "voice" option be chosen over the "exit" option. For example, in the South Africa case, before deciding ultimately to divest, the Regents began exercising the voice option, that is, by instructing the CFO to send out letters urging the companies doing business in South Africa to adopt something comparable to the Sullivan Principles. The Sullivan Principles, originally proposed by the Reverend Leon Sullivan, called for the companies to adopt strict policies of racial equality and to take steps to improve the job prospects and the lives of all their South African employees, including those of all races.

The University could do something similar in this case. It could, for example, send letters to the tobacco companies urging them to stop marketing to children (or, because of the impossibility of preventing their advertising from affecting children, to stop advertising at all); it could also urge the companies to eliminate nicotine from their products, to invest more money in research efforts to develop a "safe" cigarette, and to place warnings on tobacco products being sold in developing countries. Or the University could vote their proxies for such proposals when and if they are raised at shareholder meetings. Some institutions, including universities, have taken such an approach.37

In our view, however, such efforts would be extremely unlikely to have any effect on the tobacco companies' practices. Other institutions, whose ownership stake in the tobacco industry far exceeds that of this University, have been sending such letters and voting their proxies in such a manner for years, with no discernible effect. Indeed, of the institutions that have already divested of tobacco securities, several did so only after attempting first to influence the industry in the ways suggested, only to discover that the industry was unresponsive to such attempts.38 Some activist organizations have gone so far as to purchase stock in the tobacco companies for the sole purpose of going to shareholder meetings and urging the companies to take such steps, again to no avail. Thus, we conclude that it would be pointless to try to influence the tobacco companies in that way. Our only serious option, if we choose to act at all, is to disassociate ourselves from the industry; and the only way to do that effectively is by divestment.39

    4. The slippery-slope concern

Before stating our precise recommendations regarding divestment, there is one final issue that needs to be addressed. It is this issue that, for many people, is the most powerful reason not to divest from tobacco securities. It is the so-called slippery-slope problem. According to this argument, the University should not divest from tobacco, because tobacco products cannot be distinguished from many other products that cause disease or injury and because the behavior of tobacco companies cannot be distinguished from that of any number of other industries. If we decide to divest from tobacco, therefore, we will set into motion a process that has no clear stopping point. And although divesting from tobacco securities will have essentially no effect on the riskiness and return of the University's investment portfolio,40 the slippery slope created by the tobacco-divestment decision may pose a real threat. This is certainly a legitimate concern, one worthy of careful consideration. In the committee's view, however, the slippery-slope concern should not prevent the Regents from acting in this case to approve the committee's divestment recommendation, for several reasons.

First, the procedure adopted by the Regents in 1978 for dealing with cases that involve "serious ethical and moral questions" not only assumes the possibility of overcoming the slippery-slope concern, it creates a process that minimizes that concern. That is, if the Regents decide to divest from tobacco, any future case in which someone has a complaint about immoral or unethical behavior by a company that the University invests in and wishes to pursue the divestment option will have to go through all of the same steps that the tobacco case did.

Second, and related, the ultimate decision regarding whether to divest in this case or any future case ultimately rests with the Regents themselves. Therefore, the final, and perhaps best, check against the slippery slope is the judgment of this Board and future Boards of Regents who can evaluate each case on its own merits.

Third, if the tobacco case is taken seriously as a precedent (as the slippery-slope argument assumes it will be), this report should help to allay slippery-slope concerns. To reiterate, it is this committee's conclusion that divestment is appropriate in this case because of the combination of the extraordinary death toll attributable to tobacco products (a fact that is now beyond scientific dispute) and the deplorable and unparalleled conduct of this industry for decades that directly contradicts the core missions of the University. If future divestment cases are held to a similar standard, the slippery-slope concern would seem to be quite small.

And finally, the slippery-slope concern is probably exaggerated in any event. The Regents voted in 1978 to take action in the South Africa case (divesting finally in 1983), and that decision did not open a floodgate of "next cases" in which the University was subject to significant pressure to divest from companies doing business in every other country in the world that violated human rights. Some 20 years later, the Regents are now asked to divest from tobacco stocks. In this committee's view, a decision to divest in this case likewise is unlikely to open a floodgate of next cases.

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