International Journal of Business Ethics in Developing Economies

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The Profit Motive and Global Corporate Citizenship: A Case Study on the Spin-Off of Philip Morris International


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1 Eckerd College, St. Petersburg, Florida, United States
     

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This article addresses the spin-off of Philip Morris International (PMI) from Altria which took place back in 2008. Since that time, PMI has done very well in overseas markets, and most especially in developing markets. By 2010, PMI had gained an estimated 16 percent share of the total international cigarette market outside of the U.S. (excluding China) with revenue of $27 billion and operating income of $11.2 billion. With 2012 results, PMI reported worldwide revenues of $31.4 billion and an operating income of $14.2 billion, according to the company's annual report. This rapid revenue growth and income expansion has not come without ethical considerations. As the spin-off resulted in the move of the company headquarters from New York City to Lausanne, Switzerland, PMI became less restrained by the regulatory environment in their new home. PMI was able to capitalise on lower tobacco standards and limited advertising restrictions in global markets (and most especially developing markets) without the constraints of the negative regulatory environment and negative public attention back in the USA. This article weighs the ethical concerns of moving business to areas of less regulation versus the business advantages of such moves. There are many reasons why American corporations have begun to spin-off their international operations, but the question remains, whether the business is conducted domestically or internationally: Is the fiduciary duty to shareholders greater than the moral duty to prospective global consumers?

Keywords

Fiduciary Duty, Ethics, Globalization, Ethical Decision Making, Profit Motive.
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  • The Profit Motive and Global Corporate Citizenship: A Case Study on the Spin-Off of Philip Morris International

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Authors

James S. Welch
Eckerd College, St. Petersburg, Florida, United States

Abstract


This article addresses the spin-off of Philip Morris International (PMI) from Altria which took place back in 2008. Since that time, PMI has done very well in overseas markets, and most especially in developing markets. By 2010, PMI had gained an estimated 16 percent share of the total international cigarette market outside of the U.S. (excluding China) with revenue of $27 billion and operating income of $11.2 billion. With 2012 results, PMI reported worldwide revenues of $31.4 billion and an operating income of $14.2 billion, according to the company's annual report. This rapid revenue growth and income expansion has not come without ethical considerations. As the spin-off resulted in the move of the company headquarters from New York City to Lausanne, Switzerland, PMI became less restrained by the regulatory environment in their new home. PMI was able to capitalise on lower tobacco standards and limited advertising restrictions in global markets (and most especially developing markets) without the constraints of the negative regulatory environment and negative public attention back in the USA. This article weighs the ethical concerns of moving business to areas of less regulation versus the business advantages of such moves. There are many reasons why American corporations have begun to spin-off their international operations, but the question remains, whether the business is conducted domestically or internationally: Is the fiduciary duty to shareholders greater than the moral duty to prospective global consumers?

Keywords


Fiduciary Duty, Ethics, Globalization, Ethical Decision Making, Profit Motive.

References