Drexel University Commencement Address by Bennett S. LeBow Drexel University June 13, 1998
Drexel University Commencement Address by Bennett S. LeBow
Drexel University June 13, 1998I would like to talk to you today about something that I feel is extremely important as you embark on the next stages of your life--whether it be academic or business or another pursuit--and that is the importance of independent thought. Each one of you has your own lifetime of experience and has developed your own approach to resolving issues and making decisions, and I want you to never forget that.
At this point in your life, as graduating seniors, you are probably fiercely independent and wondering why I would be telling you this - am I "preaching to the choir," so to speak? Well, maybe. But what I am saying is dont lose that independent thought and the belief in the conviction of your opinions but build on it as you progress and mature in your post-college life. That is the thing that makes us all individuals.
And although it may seem obvious to you now, it is something that is not always practiced in the business world. In fact, individual thought is often given the back seat to other more, quote-unquote "practical" matters. Let me give you an example from my own experience - which demonstrates how difficult breaking away from the pack can be.
A few years ago, the company I run went up against one of the most powerful industries in the nation - the tobacco industry. But in doing so - as you will see - my company started a tidal wave that has brought the country to the brink of landmark tobacco legislation that could save millions of lives.
As you may know, I am chairman and CEO of Brooke Group Limited, a publicly traded company on the New York Stock Exchange. Brooke Group is a holding company which has a number of diverse interests, including a stake in an investment banking and brokerage house, commercial real estate, and, a tobacco company, the Liggett Group.
We purchased Liggett Group tobacco in the late 1980s as a financial investment. Liggett, the smallest of the five major tobacco companies, manufactured older brands, that grandparents might know - such as Chesterfield and L&M - and a number of discount cigarettes.
As the parent companys CEO, I was not involved in the day-to-day operation of the company, or in defending the company from the numerous lawsuits that were steadily being filed against the tobacco industry. Liggetts lawyers consistently told me that the suits were not a problem. You should know that in 40 years of litigation, the tobacco industry had never lost a case.
In these numerous lawsuits, Liggett simply followed the direction of the larger companies -- Philip Morris (maker of Marlboro) and RJR Nabisco (maker of Camel and Winston). With less than 3% of the market, Liggett simply followed the herd.
However, in the early 1990s, a number of things happened. States began filing lawsuits against the tobacco companies to recover the high costs associated with treating smokers who became ill. Today, there are over 40 states suits and numerous class actions against the industry, asking for hundreds of billions of dollars.
These developments, coupled with other factors, led me to begin to question the "scorched earth" litigation strategy of the other tobacco companies - which was, to put it simply, deny that smoking causes cancer and win lawsuits at all costs.
When I started to ask our companys lawyers about the litigation, they were reluctant to share information with me. This set off alarm bells. Why would my companys lawyers not be forthcoming with me? What were they -- and therefore Liggett, through them - hiding?
Without telling our lawyers or the other tobacco companies, I brought in an aggressive new law firm to examine these issues. Together we decided to do something that had never been done before - to talk to the parties suing the industry. This was the first time in 40 years that a tobacco company had ever talked to the other side - that fact alone is amazing,
In 1996, after much negotiation, Liggett did what was then unthinkable. We broke ranks with the rest of the tobacco industry and reached landmark settlements with five states and class action plaintiffs. President Clinton called this settlements "a major breakthrough," adding, that Liggett "became the very first tobacco company to acknowledge that tobacco can be deadly. This was the first crack in the stone wall of denial.
As our new law firm reviewed confidential industry documents they had obtained from our previous lawyers, they were astounded. They expressed concern to me that there may be some evidence of fraud and conspiracy. At this point, I made a decision that I wanted to have no part in an industry cover-up. I decided to make a clean break with the past and the herd mentality of the other tobacco companies. It was the right thing to do.
In the following months, Liggett expanded our settlements to include more and more states. Liggett became the first tobacco company to acknowledge that nicotine is addictive and that smoking causes cancer. Liggett released never-before seen industry documents that proved that the tobacco companies had been engaged in an extensive cover-up. Liggett also added more thorough warning labels to our cigarettes and voluntarily disclosed our ingredients on cigarette cartons - two things the rest of the industry has fought doing for years.
Liggett has also signed a pledge committing to Congress not to market cigarettes to underage smokers worldwide. To date, we are the only tobacco company to make this commitment.
As you might imagine, the other tobacco companies were not pleased with Liggetts actions and our market share has suffered since. But I would do it all over again in a heartbeat.
Our actions broke the industrys code of silence and helped get crucial information about cigarette smoking and disease out to the public. Hopefully, our efforts will culminate in a comprehensive bill - which Congress is considering right now - that will change the way the industry does business and prevent children from smoking.
You may ask why Liggett continues to sell cigarettes if we acknowledge their harmful effects. The reality is that smoking by adults is legal in this country and should remain so. The alternative is prohibition and weve seen how well that works once before. In addition, we like to think that having a whistle-blower like Liggett in the industry will help keep the industry honest in the future.
But hear me loud and clear - I am not encouraging anyone to smoke. I myself have quit and I would tell anyone close to me not to start. But is someone chooses to smoke, I want to make sure that its an informed decision and the health risks associated with smoking are fully understood.
Let me conclude by reiterating that as you go forward in life, dont always follow the herd - as Liggett did for so many years. Use your independent thought to consider all sides of an issue and decide on a course of action you believe in. Youll be surprised by what a difference it can make. Thank you
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