Who Am I?

1. Who Am I? • The leading nicotine delivery company in the U.S. • The company with the largest ad budget devoted to delivering the message that smoking is addictive • The company with the largest ad budget devoted to delivering the message that there is no such thing as a safe cigarette

2. Who Am I? • A company that has publicly called on Hollywood to edit the smoking of cigarettes out of movies • A company viewed by consumers as a credible messenger for delivering information about the health effects of smoking

3. Who Am I?

4. Who Am I?

5. Motivations Behind the Philip Morris Corporate Social Responsibility Program: A Look at the Internal Philip Morris Documents Mitch Zeller PinneyAssociates University of Maryland School of Law April 20, 2007

6. PART ONE SOME RECENT HISTORY

7. Philip Morris: From the Good Old Days to the Bad Old Days…and Back? • PM had been the Number 2 “most respected” company in 1990 on Fortune Magazine’s list • By 1995 they were Number 202 • How did it happen? • What did PM choose to do to transform its image? • What are the results of this transformation?

8. Philip Morris: From the Good Old Days to the Bad Old Days • Many factors and a confluence of events contributed to the decline • Number One: the unforgettable image of the 7 CEOs in 1994 swearing under oath to Congress that they did not believe nicotine was addictive

10. They Became Corporate Pariahs and Were Ridiculed and Mocked

12. Philip Morris: From the Good Old Days to the Bad Old Days • Other factors that contributed to the decline: • Whistleblowers • Document disclosure • FDA investigation • Non-stop bad press • Private lawsuits • Sued by every state, including North Carolina, Virginia, and Kentucky

13. PART TWO THE IMAGE CHANGING EFFORT

14. What PM Aspires To:“Societal Alignment” • “Societal Alignment means meeting or exceeding society’s expectations of us as a responsible manufacturer and marketer of all our products, especially those that carry significant health risks.” • “We have also become more certain than ever before about our corporate affairs mission – to shape a regulatory and attitudinal environment that helps each unit of the company achieve its business objectives.” (6/11/01 PM Doc; Bates 2080951609)

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

16. The Approach • PM sought to create “the foundation for credible, sustainable image enhancement… [through] transparency and action.” (6/11/01 PM Doc; Bates 2080951609) • As part of this strategy, PM sought to be the industry leader on public policy issues important to its operating companies.

17. Target Audiences • Minorities • Government officials • Business leaders • Media • Opinion leaders • Agricultural organizations • Unions • Special interest groups • Consumers • Financial analysts • PM employees

18. Target Audiences • Minorities • Government officials * • Business leaders • Media * • Opinion leaders • Agricultural organizations • Unions • Special interest groups • Consumers • Financial analysts * • PM employees * (David Sylvia, Altria Director of External Communications, 2/19/04)

19. A Key Tactic: Support Product Regulation • This strategic decision, not embraced by other tobacco companies, gave PM a unique and differentiating opportunity to advance its repositioning efforts. • Referring to the Framework Convention, PM noted that “[b]y accepting credible and meaningful proposals, we are improving our own credibility as well as our ability to sit at the table with others as we collectively resolve these and other important issues affecting our business.” (6/11/01 PM Doc; Bates 2080951609)

20. A Key Tactic: Enhanced Corporate Social Responsibility • The goal of this effort was to “help us reach out to society and enter into discussions with others in order to learn more about society’s expectations of us, so we can further adjust our behaviors, and avoid the isolation and pariah status that some would like to impose on us.” (6/11/01 PM Doc; Bates 2080951609) • Program components included: • A company-wide issues management team • Youth smoking prevention • Corporate giving (domestic violence, hunger, and disaster relief) • Grants to organizations devoted to civic improvement, conservation and environment, culture and humanities, education, and health and welfare • Increased purchasing from minority and women-owned suppliers

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

22. A Key Tactic: Candid Admissions Regarding Credibility and Trust • “We went from being one of the most respected corporations in America to being reviled, particularly because of the tobacco business.“ (Mike Pfeil) (1/19/04 PR Week article) • “I first acknowledge the role that the tobacco industry has played in generating an unprecedented level of mistrust within the public health community.” (Steve Parrish) (Yale Journal of Health Policy, Winter 2002)

23. A Key Tactic: Candid Admissions Regarding 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)

24. Early Results: Improved Favorability Ratings

25. Early Results: Improved Public Perception • 61 percent agreed that PM is changing for the better (+26% since 1999) • 60 percent agreed that PM is more open (+18%) • 60 percent agreed that PM is a more responsible corporate citizen (+21%) (6/11/01 PM Doc; Bates 2080951609)

26. PART THREE ONE EXECUTION OF THE CORPORATE RESPONSIBILITY EFFORT: COMMUNICATION STRATEGY FOR THE “REDUCED EXPOSURE” CIGARETTE

27. PM “Best Practices” • In response to the concerns of the public health community, PM devised Best Practices to guide the development and communication of efforts on the so-called “reduced exposure” or “reduced risk” cigarette. • One of PM’s “Overall strategies” is to “[m]aximize integration of scientific communication with marketing strategies.” (3/3/02 PM Doc; Bates 2067454933) • PM notes that such messages “provide opportunities to combine product information with health acknowledgments, users instructions, YSP [Youth Smoking Prevention], responsible marketing and our commitment towards reduced risk in a regulatory framework.” (3/3/02 PM Doc; Bates 2067454933)

28. Unregulated Marketplace: Need for Outreach • Engagement with third parties would give PM “[c]redibility in the absence of regulation.” (3/13/02 PM Doc; Bates 206733903) • “In the absence of comprehensive regulation PMUSA is looking to use external stakeholders to bring credibility to the potential PREP [reduced exposure] claim process.” (6/3/02 PM Doc; Bates 2505945041) • This would also enhance their overall objective of being perceived as a responsible marketer. • Perception is VERY important…

29. Measurements of Success • First measure of success is “increas[ing] the percentage of people in our target audiences that will state that: • PMUSA is basing their product exposure claims on credible and relevant scientific data • PMUSA is credible in what it claims on PREPs • PMUSA is acting effectively on key tobacco issues such as exposure reduction of smokers • PMUSA is becoming more open, transparent, and cooperative” • PM’s second measure of success is that the company’s “process of responsible reduced exposure claims is evaluated and recognized by policy makers.” (3/3/02 PM Doc; Bates 2067454933)

30. Relevance of the PM Risk Communication Program to CSR Evaluation • PM may or may not succeed commercially when it eventually launches one of these products nationally. But the measures of success identified by PM go beyond traditional notions of short-term commercial success. • It is all about looking responsible. • PM intends to use reduced exposure/risk products as part of a broader and longer-term effort to re-shape the public’s perception of the company as a responsible corporate citizen, and to make their own employees feel better about the company they work for.

31. Are PM/Altria’s Efforts Working? • Fortune Magazine 2003 Most Admired Companies for Social Responsibility • Out of 587 companies, Altria placed Number 4… • …Enron was Number 586