Champlain College Week 2 Reduce Overcrowding in Hospitals Paper *All documents needed will be attached. Please see added in instructors feedback on the pro
Champlain College Week 2 Reduce Overcrowding in Hospitals Paper *All documents needed will be attached. Please see added in instructors feedback on the problem setting that I submitted*
Part 1 – Using the Exhibit 5.4 example in the text, develop a PDSA Improvement Project outline to address the problem setting that you have been developing in previous weeks. At this point, you will have to project what you believe will be the outcomes of the various steps. Phrase the plan in terms of what you expect would happen if you were working on this project. What we are looking for is your thinking about the whole cycle of improvement that you would envision.
Part 2 Develop a listing of the tools that you would anticipate using as part of the project to improve the outcomes in the setting that you are developing.
Instructor Comments ON Week 2 assignment document attached:
This topic is a valuable one. The measures presented are all structure measures. I did not find process or outcome measures. While I respect the need for more staff and space, performance improvement is more geared toward improving processes. While more staff and space might be needed, that is not the only component that should be considered. Is patient flow an issue? Is there an inefficient admission or discharge process? I did not find a discussion of the specific data analysis tools that would be used to analyze and display the data. Ó Springer 2006
Journal of Business Ethics (2007) 73:161176
DOI 10.1007/s10551-006-9188-0
Keeping Public Institutions Invested
in Tobacco
ABSTRACT. Increasingly through the 1990s, tobacco
control advocates questioned the practice of public institutions investing in tobacco company stocks. The questioning was framed in at least three ways. First, is it ethical to
fund public expenditures with profits from a product that
causes addiction and disease? Second, is it sound social policy
to derive public income from a product that increases
healthcare costs and reduces worker productivity? Finally,
is it sound fiscal policy to invest in an historically profitable
industry facing multiplying legal and regulatory challenges?
While the tobacco industry preferred to restrict discussion
to the fiscal question, and offered an affirmative answer, its
position was weakened by depressed stock prices brought
on by actions of the industry as much as by tobacco control
activism. As part of a campaign to restore its credibility as an
investment vehicle with public fund managers, Philip
Morris (PM) commissioned a report from the influential
investment managers/advisors Wilshire Associates. However, Wilshire had only recently conducted such a study for
the Washington State Investment Board (WSIB), assuring
the board that the value tobacco stocks added to an
investment portfolio if any was too small to be measured. Nonetheless, within a year, Wilshire produced a
report for PM which appeared to laud the investment value
of tobacco and to dismiss tobacco-excluded investment
alternatives. This paper examines how Wilshire produced
apparently diametrically opposed reports for clients with
different interests. It reveals a pattern of potential conflicts
Nathaniel Wander Ph.D. is a public health anthropologist and a
Staff Research Associate in Department of Social and Behavioral Sciences at the University of California, San
Francisco.
Ruth Malone, R.N., Ph.D., FAAN is a nurse and a health
policy specialist and also a Professor in the Department of
Social and Behavioral Sciences at the University of California, San Francisco. This article developed from a research
project of Dr. Malones. The research uses tobacco industry
documents to study how the industry defends itself from public
health charges that industry behavior is itself the source of the
global tobacco epidemic.
Nathaniel Wander
Ruth E. Malone
of interest among tobacco companies, financial analysis
firms, investment authorities, and institutional fund managers. It demonstrates substantial violations of two generally
accepted ethical principles of business consulting: veracity
and transparency.
KEY WORDS: divestment, ethics, consulting, public
health policy, public investments, tobacco industry documents
ABBREVIATIONS: PM: Philip Morris; WSIB: Washington State Investment Board; MSA: Master Settlement
Agreement; AG: attorneys general; LTDL: Legacy Tobacco Documents Library; SRI: socially responsible
investment/investing; CalPERS: California Public
EmployeesÕ Retirement System; CII: Council Of Institutional Investors; NYCERS: New York City EmployeesÕ Retirement System; IRRC: Investor Responsibility
Research Center; IRFC: Investor Relations and Financial
Communications; AMA: American Medical Association;
WHO: World Health Organization; UC: University of
California
Increasingly through the 1990s, tobacco control
advocates questioned whether investments by public
institutions in tobacco company stocks were worth
itÕ (Cogan, 2000; Wander and Malone, 2004; Wander and Malone, 2006). The question was posed and
answered from at least three frames of reference.
First, is it ethical to fund public expenditures with
profits from a product that causes addiction and disease? Second, is it sound social policy to derive public
income from a product that increases healthcare costs
and reduces worker productivity? Finally, is it sound
fiscal policy to invest in an historically profitable
industry facing multiplying legal and regulatory
challenges (Bailm et al., 1995; Schueth, 1997)?
While the tobacco industry worked to confine the
discussion to the fiscal frame, insisting on the
continuing financial value of tobacco stocks (Philip
162
Nathaniel Wander and Ruth E. Malone
Morris, 1997; Wander and Malone, 2006), its position
was weakened between 1993 and 1996 by depressed
stock prices (Shapiro, 1994); multiple lawsuits, proposed regulations and excise taxes (Rabin and Sugarman, 2001); tobacco control and socially responsible
investment (SRI) activism (Cogan, 2000; OÕBrien,
1998); and actions of the industry itself. Notable
among the latter was the Marlboro price cut of April 2,
1993, which surprised investors and resulted in Philip
Morris (PM) stock losing approximately $13 billion
during a single dayÕs trading on the New York Stock
Exchange (Kluger, 1997). Challenges from anxious
institutional investors continued for at least another
year (Collins, 1995a, 1995b).
In December 1996, as part of a campaign to restore
its credibility as an investment vehicle with public
fund managers, PM commissioned a report from the
influential investment management/advising firm of
Wilshire Associates (Wilshire Associates). Wilshire
was asked to compare the financial returns of tobacco
investments in general, and of PM in particular, to
various investment portfolios excluding tobacco
(Hughes, 1997a). Unbeknownst to PM, however,
Wilshire had conducted such a study only 4 months
earlier, assuring the Washington State Investment
Board (WSIB) then contemplating divestment of its
tobacco holdings that the value tobacco stocks added
to an investment portfolio, if any, was too small to be
measured (Stern, 1996; Wilshire Associates, 1997).
This paper analyzes the contents and contexts of
WilshireÕs September 1997 report for PM, which
produced conclusions apparently diametrically opposed to those of its August 1996 Washington State
report. While others have described the use of
financial industry analysts to defend tobacco interests
before legislative and regulatory bodies (Alamar and
Glantz, 2004), this paper demonstrates how the
industry used financial consultants to intervene directly in investment decision-making by public funds
managers. It analyzes the implications of this intervention especially with regard to two generally accepted ethical principles of business consulting:
veracity and transparency.
bacco stock divestment movement of the 1990s
(Cogan, 2000; Wander and Malone, 2004; Wander and Malone, 2006). We analyzed previously
private tobacco industry documents, first made
public under State of Minnesota v. Philip Morris, Inc.
et al. (1998), and published electronically along
with additional industry documents following the
1998 Master Settlement Agreement (MSA) of
lawsuits brought by 46 state attorneys general (AG)
against seven tobacco industry defendants (National Association of Attorneys General, 1998).
These documents are available online at the Legacy Tobacco Documents Library (LTDL) (http://
www.legacy.library.ucsf.edu/).1
Between August 23, 2003 and February 2, 2006
we searched for documentary materials related to
this case. Having discovered various reports from
Wilshire among documents previously identified as
related to divestment, we used further snowball
sampling (MacKenzie et al., 2003; Malone and
Balbach, 2000), beginning with the key word
Wilshire, to generate additional search terms,
including names of involved PM executives,
institutional investors, financial experts and SRI
funds. We searched titles of files, documents
numbered sequentially to documents of interest,
and related dates. In addition to industry documents, we searched Academic LexisNexisTM for
relevant contemporaneous media reports. We also
searched websites of government, financial, and
investment institutions that appeared to play some
role in the events.
We retrieved and examined approximately 150
documents of direct relevance, and used them to
construct a case history. We focused on the activities
of Wilshire Associates, and the developing relationship between PM and a prominent public investment/corporate governance expert, who played a
key role in distributing the final PM/Wilshire
report.
Results
Background
Methods
This paper arose out of research on how the U.S.
tobacco industry defended itself against the to-
Pressure from tobacco stock divestment advocates
peaked between 1990 and 1992 with regard to
academic institutions (Cogan, 2000; Wander and
Keeping Public Institutions Invested in Tobacco
Malone, 2004), and between 1994 and 1998
regarding divestment activities before state and local
legislatures and investment boards (Wander and
Malone, 2006). Advocates wanted these institutions
to sell off their tobacco stock holdings as a means of
isolating the tobacco industry in the public eye from
legitimate business institutions (Advocacy Institute,
1990).
The mid-1990s also saw the rise of a SRI
movement within the financial community (Cogan,
2000; OÕBrien, 1998). SRI funds excluded various
investments ranging from fossil fuels to gambling to
munitions. Two of the most prominent SRI funds,
Domini Social Investments and the Calvert Group,
focused on tobacco exclusion, and allied themselves
with the tobacco control community (Calvert
Group, 1996; Kinder Lydenberg Domini & Co,
Inc., 1996). The emergence of tobacco-excluded
funds, paralleling divestment advocatesÕ calls to sell
tobacco stocks, contributed to a resurgence in
divestment activism.
In the mid-1990s, the tobacco industry, particularly PM, also ran onto financial shoals: PMÕs stock
lost $30 billion in market valuation between 1992
and 1994 (Shapiro, 1994). Some PM investors (and
executives) blamed CEO Michael Miles, attributing
the companyÕs losses to MilesÕ 1993 decision to cut
the price of PMÕs flagship brand (Elliott, 1994;
Kluger, 1997). Marlboro Friday had produced a
one-day drop of 22% in the value of PM shares
(Weiss, 1994) as PMÕs unanticipated, unilateral price
cut was interpreted as a sign of industry instabilities.
Other investors, however, worried more about
ongoing legal, regulatory, and tax increase threats.
These included rising state and federal excise taxes
following CaliforniaÕs 1988 use of tobacco taxes to
fund tobacco control policy (Chaloupka et al.,
2001); the first class action lawsuits on smoking and
health, and the state AG Medicaid recovery lawsuits
(Rabin, 2001), which led some AGÕs to call for their
states to divest from tobacco holdings (Wander and
Malone, 2006); and FDA plans to regulate nicotine
as a drug and further control tobacco marketing
(Kessler, 2001). When Miles was forced from PMÕs
leadership in mid-1994, California Public EmployeesÕ Retirement Fund (CalPERS) General Counsel
Richard Koppes told the Wall Street Journal: The
pressure isnÕt going away. We arenÕt happy (Shapiro, 1994).
163
The new PM management team, led by CEO
Geoffrey Bible and Board Chair R. William Murray,
sought to reassure large shareholders of the companyÕs basic soundness. However, a prominent
group within the Council of Institutional Investors
(CII), led by CalPERS, the New York City
EmployeesÕ Retirement System (NYCERS), the
Connecticut Retirement & Trust Funds, the Pennsylvania State EmployeesÕ Retirement System, the
International Brotherhood of Teamsters, and the
United Food & Commercial Workers Union, was
not appeased. According to the Investor Responsibility Research Center (IRRC), these shareholders
held fewer than 5% of PMÕs shares at the time
(OÕHara, 1994b) possibly fewer than 2% according
to PM accounts (Bartlett, 1994; Bible, 1994) but
a number of other shareholders, including some of
the 10 largest, [had] contacted them about possibly
joining their efforts (OÕHara, 1994b). The visibility
of these institutions may have counted for even
more than the number of shares they held: PMÕs
expressed fear was of a public perception problem
(Dunham, 1996).
PM management finally agreed to meet with
these investors in September 1994, but the companyÕs decision to tightly script what the institutional
representatives had expected to be an open giveand-take precipitated an angry NYCERS-led
walkout (Bartlett et al., 1994; Bring, 1995; Burton
and Menn, 1994; OÕHara, 1994a). Although a few
representatives including CalPERSÕ Richard Koppes
remained (Bartlett et al., 1994), PMÕs continued
refusal to facilitate unmediated access by the institutions to the companyÕs outside (i.e., non-management) directors led to CalPERSÕ refusal to
support the companyÕs nominated directors the following April, a highly unusual action by a major
shareholder (Collins, 1995a). CalPERS emphasized,
however, that its action was symbolic, declining
to urge others to follow its lead. By voting no,Õ
General Counsel Koppes told the media, we hope
to send a message that the demand to meet with
outside directors independently of management
would not go away (Sinton, 1995).
This clash between PM and institutional investors
may have been exacerbated by the spread of an
investment strategy known as index-based or passive
investing. This practice calls for buying and holding
an array of stocks based on an index or representative
164
Nathaniel Wander and Ruth E. Malone
sample that mirrors the economy as a whole like
the Standard & Poor 500, composed of 500 companies with at least $5 billion in outstanding stock
shares rather than trying to outguess the market by
buying and selling stocks based on individual performance. The indexing strategy was derived in part
from observations that actively managed portfolios
rarely outperformed the stock market as a whole,
and that the buying and selling of individual stocks
increased transaction and management costs, and led
to potentially higher capital gains taxes (Bogle,
2000).
Wilshire Associates, founded in 1972, describes
itself as an innovator in the field of pension fund
advising (Wilshire Associates, 2006). It was an
important agent in spreading the indexing strategy to
public funds (Chester and Hull, 1996). Today a
global advisory company specializing in investment
products, consulting services, and technology products [serving] in excess of 600 organizations in more
than 20 countries representing assets exceeding US
$12.5 trillion (Wilshire Associates, 2006), Wilshire
is the proprietor of the two largest indices of U.S.
stocks: the Wilshire 2500, and the Wilshire 5000.
Investors Business Daily suggested that the CalPERS challenge might be explained by its investment strategy.
CalPERS is constrained in how it may influence a
companyÕs affairs. Because its equity portfolio is indexed, it canÕt simply sell and walk away. Consequently, it must rely on its clout as a big investor
(Achstatter, 1995).
However, in 2000, when objections were lodged to
WilshireÕs recommendation that the University of
California (UC) invest in an index fund containing
almost $60 million in tobacco company stocks the
Regents would divest of all tobacco stocks the following year, against WilshireÕs initial advice (Parke,
2001) Wilshire counseled, If the regents chose to
prohibit tobacco issues, those [could] be excluded
from the index funds or the actively managed portion (Williams, 2000). While the principles of passive
investing might have helped to convince institutional
investors that they were constrained from divesting
from tobacco (Achstatter, 1995), or, alternatively,
supported fund managersÕ inclinations to resist
divestment as bad financial practice, bad public policy,
or both (Comito, 1997), it was entirely possible to
invest in a tobacco-excluded indexed portfolio.
Consequently, in December 1996, PMÕs Vice
President for Investor Relations and Financial
Communications (IRFC) Tony Hughes commissioned Wilshire to produce a study of long-term
performance of major index funds vs. social index
funds, also performance of indexÕs [sic] with and
without tobacco holdings … to provide useful data
for managers of public pension funds (Hughes,
1997a). Apparently, it was not until just days before
Wilshire delivered its first draft to PM that Corporate
Secretary G. Penn Holsenbeck learned that Wilshire
had recently completed a similar report for Washington State. Holsenbeck wrote to Hughes: It [the
WSIB/Wilshire report] certainly doesnÕt help our
position. What happened to the study we commissioned from Wilshire? … Will it do more harm than
good? Have we paid Wilshire? Should we be
working with someone else?(Holsenbeck, 1997c).
Dueling reports
WilshireÕs Washington State (WSIB/Wilshire) report
The State of Washington considered tobacco stock
divestment on at least three occasions between 1990
and 2000 (Wander and Malone, 2006). In 1996, the
WSIB commissioned Wilshire Associates to analyze
the performance of the Wilshire 5000 Index
excluding the stocks of tobacco companies (Stern,
1996). WilshireÕs August 1996 conclusion was simple
and straightforward: [T]he results do not indicate
any significant difference in the performance of the
index with or without these stocks (Stern, 1996).
Between July 1986 and June 1996, the WSIB/
Wilshire report observed, while the Wilshire 5000
index containing tobacco stocks had marginally
outperformed the indices without them, the results
were not statistically significant (Stern, 1996).
In a document that PMÕs Holsenbeck understood
to be part of WilshireÕs reporting for WSIB, Wilshire
reaffirmed its conclusions with updated quarterly
reports through March 1997. The analysts found no
significant or consistent difference between indices with or without tobacco. Both had periods of
outperformance and underperformance (Wilshire
Associates, 1997). Even this was an overstatement in
favor of tobacco: the accompanying graphs and chart
Keeping Public Institutions Invested in Tobacco
showed that the basic index had not substantially
outperformed the tobacco-excluded version since
December 1991.
WilshireÕs Philip Morris (PM/Wilshire) report
PM commissioned Wilshire to conduct eight
performance analyses that spoke to three questions:
(1) how tobacco stock performance compared to that
of the market in general as represented by three
indices the S&P 500, the Wilshire 2500, and the
Wilshire 5000; (2) how tobacco stocks compared to a
sample of SRI funds; and (3) how tobacco-excluded
versions of the three indices performed as compared
to the standard versions. In regard to the first two
questions, Wilshire concluded that (a) an array of 13
stocks identified as tobacco stocks by the American
Medical Association (AMA) significantly outperform[ed] the general market indices; (b) that PM by
itself significantly outperform[ed] the indices, and
(c) PM shares outperform[ed] shares in SRI funds
(Bornstein et al., 1997). In regard to the third question, Wilshire concluded that (d) tobacco-excluded
versions of the indices marginally underperform[ed] indices containing tobacco, while (e) SRI
funds significantly underperform[ed] tobaccocontaining indices (Bornstein et al., 1997).
On the face of it, this sounded like a strong
endorsement of the value of tobacco stocks in an
investment portfolio, and suggested problems with
tobacco-excluded investing, directly contradicting
the no-meaningful-difference finding Wilshire had
presented to Washington State a year earlier.
The skewing of the PM/Wilshire report
Analysis of the PM/Wilshire report demonstrates
that its conclusions (as excerpted above from the
executive summary), were the products of rhetorical
and methodological maneuvers that favored tobacco
investments and put SRI funds at a disadvantage.
Favoring tobacco
In its executive …
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