King of the idiots, Stanton Glantz, takes up the story...
In 2000, motivated in part by the sea of litigation facing the tobacco industry, the huge California Public Employees Retirement System (CalPERS) voted to divest the tobacco stocks that it held directly. Perhaps because they were so small, it did not instruct its outside investment advisors to divest their tobacco holdings.
Since then, the tobacco companies have soldiered on despite paying out hundreds of billions of dollars in settlements and continue to sued, most notably in Quebec, Canada and Florida. Because nicotine is an addictive drug they have been able to raise prices faster than consumption has dropped and so continued to remain profitable. Indeed, tobacco stocks are at an all-time high.
At the same time, CalPERS’ tobacco holdings (through the outside investors) have grown to several hundred million dollars.
What Glantz neglects to mention is that it was thanks to people like him that CalPERS got rid of some of the 21st century's best performing shares in the first place. He believed that his regressive and illiberal tobacco control policies would lead to smoking being wiped out within the foreseeable future and Californian politicians were dumb enough to believe him.
It was an incredibly expensive mistake. Tobacco companies have done more than 'soldier on' since the year 2000. The shares that CalPERS sold are worth 900 per cent more than they were 16 years ago. The shares that the outside investment advisors kept hold of - which were 'so small' in 2000 - are now worth $547 million. The 2000 divestment is estimated to have cost the fund $3 billion.
That is why CalPERS held a vote on Monday. Some of its members have grown tired of losing money hand over first and wanted to get rid of the ban on tobacco stock. They lost the vote 9-3 and, to add insult to injury, economically illiterate fanatics like Glantz then persuaded them to get rid of their direct holdings as well.
Despite the California Public Employees’ Retirement System’s anxiety about the pension fund’s current financial state, representatives of state workers urged the board to stay away from tobacco.“I don’t want to go back to my retirees and tell them their retirement depends on companies that invest in disease and death,” said Terry Brennand of Service Employees International Union, which represents tens of thousands of state workers.CalPERS also got an earful from the American Heart Association, American Cancer Society and others, citing the social and public health costs and arguing that CalPERS was in danger of sending potential smokers the wrong message. Cynthia Hallett of Americans for Nonsmokers’ Rights said CalPERS would risk its global “reputation for responsible investing” if it jumped back into tobacco stocks.Only time will tell how costly this becomes for the under-funded pension pot and those who depend on it.
It should go without saying that there is no 'public health' benefit to tobacco divestment, just as there is no environmental benefit from fossil fuel divestment. It is an entirely self-defeating action designed to give zealots a warm, fuzzy feeling. At best, it has a microscopic, temporary effect on the share price, but it does not affect company profits one iota and could not conceivably have any effect on the smoking rate.
Board member J.J. Jelinic, on the other hand, opposed the motion to expand CalPERS’ anti-tobacco stance. “I am not aware of anyone who smokes or doesn’t smoke based on whether CalPERS invests or doesn’t invest, and if we’re not changing behavior, then what are we getting for the money we’re giving up?” Jelinic said.