Four big public pension funds will support a shareholder resolution seeking to end the controversial Joe Camel advertising campaign of RJR Nabisco Holdings Corp.
Four others are leaning toward supporting the resolution, an informal survey reveals.
RJR Nabisco officials say passage of the resolution could significantly impact the company's financial health.
Trustees of the $110 billion California Public Employees' Retirement System, Sacramento, and the proxy committee of the $29.5 billion New York City Employees' Retirement System voted to use their funds' proxies to support the resolution.
CalPERS holds 1.4 million shares in RJR Nabisco; NYCERS, 850,035 shares.
Also, Connecticut Treasurer Christopher B. Burnham, sole trustee for the $15 billion Connecticut Trust Funds, Hartford, has instructed the fund's money managers to vote proxies in favor of the resolution. Connecticut owns about 333,000 shares.
And, trustees for the $7.3 billion San Francisco City & County Employees' Retirement System, which owns 36,000 shares, said they will support the resolution.
Officials for the New York State Teachers' Retirement System, Albany; the Minnesota State Board of Investments, St. Paul; the Massachusetts Pension Reserves Investment Management board, Boston; and the Baltimore Retirement Systems, all indicated preliminary support for the resolution, but none has voted yet.
New York State Teachers' owns 2.1 million shares and Minnesota, 845,378 shares. Information on the other funds' ownership was not available.
RJR Nabisco had about 328 million shares of common stock outstanding as of Dec. 31. Of that amount, pension funds held 11.3 million; mutual funds, 68 million shares; and insurance companies, 2.3 million, according to CDA/Spectrum.
Critics of Joe Camel - who claim the ad campaign encourages children to smoke cigarettes - also are hoping Teachers Insurance Annuity Association-College Retirement Equities Fund will support the resolution. TIAA-CREF officials said they won't disclose their vote.
RJR Nabisco executives deny the campaign encourages children to smoke.
A shareholder resolution sponsored by members of the Interfaith Center on Corporate Responsibility, New York, asks for an end to the Joe Camel campaign worldwide by 1998 unless independent research shows the campaign isn't influencing minors.
The resolution will come before shareholders at an April 16 meeting in Winston-Salem, N.C.
Liggett heats up debate
The claim by executives of the Liggett Group Inc. that tobacco companies have for decades consciously marketed products to children as young as 14 has heated the Joe Camel debate. Liggett executives also said tobacco is addictive and causes cancer.
Even with the support of the pension funds, the resolution isn't expected to be approved or even get close to a majority of shareholder votes.
Moreover, shareholder proposals are seldom binding, so even if the proposal received a majority of shareholder votes, the company is not bound to take heed.
But Douglas G. Cogan, director of the new Tobacco Information Service of the Investor Responsibility Research Center, Washington, said if as many of 10% of the shares are voted in favor of the anti-Joe Camel resolution, the government might see the vote as a reason to step up regulation of tobacco companies.
The authors of the shareholders' resolution claim studies show adolescents are attracted to the Joe Camel character. They say studies also show high correlations between the Joe Camel ads and the percentage of minors smoking Camel cigarettes.
RJR Nabisco executives dispute that claim, citing a 1994 Federal Trade Commission investigation that found no convincing evidence of a link between the Joe Camel campaign and increased smoking among children.
But last week FTC staff investigators recommended the agency charge RJR's tobacco subsidiary, R.J. Reynolds Tobacco Co., with unfair advertising practices. The investigators alleged the Joe Camel ad campaign does indeed target children. FTC spokeswoman Victoria Streitfeld confirmed the recommendation is based on new evidence, but declined to say what the new evidence is.
RJR executives blasted the FTC's latest move and said the agency lacks any basis to file a complaint.
But in voting for the resolution, CalPERS executives said the Joe Camel campaign might hurt the financial health of RJR*and other tobacco companies.
CalPERS trustees reject advice
CalPERS trustees rejected the advice of its staff to abstain from voting on the resolution.
In a report, the staff noted that some surveys had found the market share of Camel cigarettes among underaged youths surged from 0.5% to more than 30% after the Joe Camel ads began in 1988.
The report said CalPERS is well aware of the dangers to public health posed by cigarette smoking. The CalPERS report also said the staff is aware that the regulatory backlash incited by the Joe Camel campaign might have financial implications for RJR.
But, the report said, "given the potential negative financial impact that may arise from ceasing the campaign, and the fact that studies regarding this campaign have been inconclusive, CalPERS believes that it must abstain."
When the issue came up for a vote, Chief Investment Officer Sheryl Pressler excused herself from the discussion. She said she owns RJR Nabisco stock worth more than $10,000.
William Crist, chairman of the CalPERS board, took issue with the report and voted to support the shareholder resolution.
Mr. Crist said he wanted to be careful "not to engage in social engineering." However, he said continuance of the Joe Camel campaign could have a "potent negative financial impact" for RJR.
Trustee Michael Flaherman said he couldn't support the shareholder resolution. He said that while the campaign might be "morally repugnant," he didn't think the "issue was an economic issue."
"People make money doing morally repugnant things," he added.
Charles Valdes, newly re-elected chairman of CalPERS' investment committee, supported Mr. Crist. Mr. Valdes said if the Joe Camel campaign continues, "it might result in further government action" against tobacco companies that would drive down share prices in the long term.
The board voted overwhelmingly to support the shareholder resolution.
In Connecticut, Mr. Burnham said: "The tobacco industry is at a crossroads. My advice, as a shareholder and a former investment banker, is that they should stop this 'scorched earth' policy, recognize the mistakes of the past and conduct their business in the best interest of their shareholders and society."
RJR spokeswoman Carol Makovich said previous shareholder resolutions against the Joe Camel campaign or similar advertising were defeated overwhelmingly by shareholders.
Maura Ellis, another RJR spokeswoman, said published reports that RJR intends to drop the Joe Camel campaign are false. She said some media pundits "in their infinite wisdom" had concluded RJR had decided to pull Joe Camel advertising.
"That was not our strategy," she said.
Though some of the nation's largest pension funds are indicating support for the resolution, at least one is voting against it.
Virginia Retirement System, Richmond, which owns about $10.3 million of RJR stock, plans to vote against the shareholder proposal because "it is terribly subjective to say that the Joe Camel advertising, as opposed to any other ads, encourages teen-agers to smoke," said Bill Sullivan, a spokesman.
Officials at other funds - including Los Angeles County Employees' Retirement Association, Pasadena, Calif., and the Oakland (Calif.) Municipal Employees' Retirement System - weren't aware of it. LACERA uses an outside firm to vote its proxies.
Even if the resolution gets more votes than expected, RJR probably cannot afford to end the campaign, said Mr. Cogan, of the IRRC's tobacco service.
Camel sales are the only "bright spot" in RJR's stable of cigarettes, he said. Also, the Joe Camel campaign just began overseas, and sales appear to be increasing.