Under intense pressure from major institutional investors, the directors of Philip Morris Cos. have agreed to a meeting with pension fund shareholders to discuss the board's decision not to split its tobacco operations from its food and other businesses.
In addition, shareholders plan to discuss the high proxy vote in favor of eliminating the corporation's anti-takeover poison pill measure.
"With the turbulence on the tobacco side, the logic of putting all the problems in one place is compelling," said William B. Patterson, director-corporate affairs, International Brotherhood of Teamsters, Washington, whose member funds own $130 million worth of Philip Morris stock.
The meeting is scheduled for Sept. 21 at the company's headquarters in New York, Mr. Patterson said.
From Philip Morris, the four management and two non-management directors will attend the meeting, said Nicholas Rolli, director-financial communications.
The four management directors attending include the company's new top two executives - R. William Murray, chairman, and Geoffrey C. Bible, president and chief executive officer.
The two other management directors planning to attend are Hans Storr, executive vice president and chief financial officer, and Murray Bring, senior vice president and general counsel.
Hamish Maxwell, Philip Morris' former chairman and chief executive officer, is one of the two non-management directors who expects attend. Mr. Rolli said the other non-management director hasn't been selected yet.
In addition to the Teamsters fund, Mr. Patterson said other pension funds planning to attend are the California Public Employees' Retirement System, Sacramento; New York City Retirement Systems; New York State & Local Retirement Systems, Albany; State Teachers Retirement System of Ohio, Columbus; Florida State Board of Administration, Tallahassee; Connecticut Trust Funds, Hartford; United Food & Commercial Workers International Union pension fund, Washington; and Pennsylvania State Employes' Retirement System, Harrisburg.
Mr. Rolli confirmed the company sent invitations to all of those funds, except New York State and Ohio Teachers.
The meeting will be the first ever by Philip Morris directors with a group of major shareholders, Mr. Rolli added.
Concerning the directors' objective at the meeting, Mr. Rolli said, "It's our intention to hear their questions and have the opportunity to communicate our strategy and vision for the company."
He said no agenda of discussion has been set. "I expect Mr. Murray and Mr. Bible will make brief comments," he added. "But most of the time will be taken to hear the shareholders concerns."
Officials at other pension funds and the Council of Institutional Investors, Washington, which is assisting in arranging the meeting, couldn't be reached.
Michael A. Miles, Philip Morris chairman and CEO, resigned in May after the board halted discussions on spinning off its tobacco business, which includes Marlboro cigarettes, from the rest of the company, which includes Kraft General Foods and Miller Brewing Co.
The big shareholders are concerned about the potential tobacco liability of the company and the growing interest by the government to raise tobacco taxes and regulation.
The Florida State Board is considering legal action against Philip Morris for purportedly concealing the harmful affects on health of tobacco, said I. Walton Bader, partner in the White Plains, N.Y., law firm of Bader and Bader and attorney for the $36.2 billion Florida system.
Explaining the fund's basis of the possible legal action, Mr. Bader said: "The price of the Philip Morris stock would have been lower than when we bought it. So that's why we are (considering) suing." Mr. Bader said the suit could be filed in late August.
At the pending Philip Morris meeting, Mr. Patterson said shareholders also will discuss the poison pill resolution, "since it's gotten such strong support."
The resolution, introduced by a St. Louis Teamsters pension fund seeking to eliminate the poison pill, garnered 43% of the proxy votes at the annual shareholder meeting in April and 41% at last year's meeting.
"We're going to the meeting with open ears and minds to find out why that option (of spinning off the tobacco operations) is off the table," Mr. Patterson said.
"We're not saying all the pension fund shareholders are for a split," he said. "But there is strong sentiment toward the split" among them.
"We find the arguments for the split compelling," he added.
At the meeting, the shareholders "want the company to lay out the rationale for its strategic direction," which continues to include tobacco, he added.
Mr. Patterson said Philip Morris' board, through its corporate secretary, informed the pension funds of its agreement to meet with them. The agreement came after six large pension funds - California Employees, Connecticut Trust, New York City, Teamsters, United Food and Pennsylvania State Employes - wrote a second letter to the company requesting the meeting following the failure of the company to make such an arrangement after a first letter in May.
In regard to the possible Florida system suit, Mr. Bader noted several suits already are pending in New York against the company. He also said Florida enacted a law this year eliminating as a defense by tobacco companies that tobacco users knowingly assume the health risks of the product.