Tobacco Companies Fail the Corporate Social Responsibility Test of a Free-Market Advocate

August 17, 2017

Philip Morris International and other cigarette manufacturers are among the most profitable firms in the world, selling the world’s most lethal legal product. They prominently advertise their commitment to corporate social responsibility on everything from child labor to renewable energy. They’ve even conceded that smoking is dangerous and say they are committed to a smoke-free world. But none of these initiatives make up for breaching their most fundamental corporate social responsibility—one defined quite cogently by free-market-advocate Milton Friedman—to pursue their profits “without deception and fraud.”

Many people are aware of tobacco company deception, but rarely of its true extent. The latest revelations come from Reuters which disclosed internal documents from Philip Morris International (PMI) that document clandestine efforts to influence an international tobacco control conference last fall. It is impossible to name a single industry that produces a deadlier product—associated with 7 million premature deaths every year—and which has been working so long and persistently at subverting public policy.

A trove of internal tobacco company documents, going back to the 1950s, showed that cigarette company executives knew smoking was addictive and caused serious harms even as they lied under oath before the US Congress. After such an exposé, public shame should have been enough to modify their behavior even if they hadn’t been subject to costly settlements. But disclosures of unethical opposition to public health kept (and keep) coming.

In the 1990s, cigarette manufacturers secretly encouraged smuggling and had the audacity to use evidence of that smuggling as an argument to reduce tobacco taxes. Eventually, Imperial Tobacco settled with the Canadian government for $582 million and Rothmans settled for $534 million. Canada wasn’t alone. The United Kingdom and the European Union also had to investigate and negotiate settlements with tobacco companies for complicity in smuggling.

In 2011, when Australia decided to legislate plain packaging of cigarettes to reduce the appeal of smoking, Philip Morris opposed the policy through normal domestic policy procedures. It even appealed to the Supreme Court and lost. But rather than accept the public process, PMI paid legal fees for Ukraine, Honduras, the Dominican Republic, Cuba, and Indonesia to contest the policy at the World Trade Organization (WTO). Then it arranged to sell its Australian subsidiary to its Hong Kong operations, allowing it to sue Australia under a recently negotiated trade pact. Completely legal, but imposing an unethical burden on the public sector to try to protect public health.

This spring, Imperial Tobacco submitted comments to the Canadian Parliament arguing against a bill to introduce plain packaging. In the tradition of adversarial legal process, Imperial Tobacco marshals numerous arguments questioning process and evidence, raising doubts and pleading that legal companies are being made victims of tobacco control extremists. It directly attacks the plain packaging policy itself by stating “[t]here is no compelling evidence … to support making Canadian cigarettes all look alike.” They cite a 2014 research paper but neglect to mention: subsequent research, which shows that smoking prevalence declined more sharply after the policy than before; a review by the Australian government concluding that the policy was effective; or the Economics of Tobacco Control (pp. 296ff) which came out last fall. Most importantly, they never entertain the notion that in a context of uncertainty, the possibility of saving lives might justify an experiment that limits their business opportunities.

Perhaps the most significant social commitments publicly made by cigarette manufacturers is to avoid marketing to young people. Yet, today, Indian officials are struggling to force Philip Morris to comply with domestic laws prohibiting advertising to youths. Such efforts are described in internal company memos as aimed at “winning the hearts and minds” of people between the ages of 18 and 24. Other documents show that cigarette company support anti-smoking campaigns among youth in order to burnish their images and create favorable associations between smoking and maturity. The companies view these campaigns as successful without any evidence that they dissuade young people from starting to smoke.

Even a strong proponent of free-enterprise like Milton Friedman recognized limits to what businesses can do in pursuit of profit. In Capitalism and Freedom, he wrote:

There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud. [emphasis added]

Tobacco companies fail this test time and again.


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.

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