NewsWire--APRIL 30, 1996

TOPIC: Business Ethics, Common Stock Valuation

SOURCE: "Exposure to Workplace Tobacco Smoke is Greater than Believed, Study Says," Timothy Noah, Wall Street Journal, April 24, 1996, B11; "AMA Wants Tobacco-Free Mutual Funds," Karen DaMato, Wall Street Journal, April 24, 1996, C1.

SYNOPSIS: Prompted by the release of a recent study showing the health dangers of second-hand smoke, American Medical Association officials urged investors to avoid 13 stocks and 1,474 mutual funds that invest in tobacco manufacturing. The AMA will publish an annual list of offending funds and praise funds that sign a no-tobacco pledge and join the "AMA Coalition of Tobacco-Free Investments." The articles offer an opportunity to discuss the goals of the corporation, or fund manager, and the impact on shareholder value of boycotting a company's stock. This is a very controversial and open-ended issue. The discussion comments herein are meant as a guide for getting a discussion going, and are not meant to suggest the author's opinions to students.

DISCUSSION QUESTIONS:

1. Are tobacco companies acting in an unethical manner by selling tobacco products?

2. Are investors who hold tobacco company stock acting in an unethical manner?

3. How will the AMA proposal impact the value of the tobacco companies?

4. What other methods could the AMA use to impact the tobacco companies?