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The following is an excerpt from a DEF 14A SEC Filing, filed by PHILIP MORRIS INTERNATIONAL INC. on 3/27/2014.
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Brandon J. Rees, Acting Director, Office of Investment of the American Federation of Labor and Congress of Industrial Organizations, on behalf of the AFL-CIO Reserve Fund, claiming beneficial ownership of at least $2,000 worth of shares, submitted the proposal set forth below. The address and shareholdings of the proponent will be furnished upon request made to the Corporate Secretary. The Company is not responsible for the content of the shareholder proposal, which is printed below exactly as it was submitted.

Whereas , corporate lobbying exposes our company to risks that could adversely affect the company’s stated goals, objectives, and ultimately shareholder value, and

Whereas , we rely on the information provided by our company, and, therefore, have a strong interest in full disclosure of our company’s lobbying to evaluate whether it is consistent with our company’s expressed goals and in the best interests of shareholders and long-term value;

Resolved , the shareholders of Philip Morris International, Inc. (“PMI”) request that the Board authorize the preparation of a report, updated annually, disclosing:



Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications.



Payments by PMI used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and the recipient.



PMI’s membership in, and payments to, any tax-exempt organization that writes and endorses model legislation.



Description of management’s and the Board’s decision making process and oversight for making payments described in sections 2 and 3 above.

For purposes of this proposal, a “grassroots lobbying communication” is a communication directed to the general public that (a) refers to specific legislation or regulation, (b) reflects a view on the legislation or regulation and (c) encourages the recipient of the communication to take action with respect to the legislation or regulation. “Indirect lobbying” is lobbying

engaged in by a trade association or other organization of which PMI is a member.

Both “direct and indirect lobbying” and “grassroots lobbying communications” include efforts at the local, state and federal levels. Neither “lobbying” nor “grassroots lobbying communications” include efforts to participate or intervene in any political campaign or to influence the general public or any segment thereof with respect to an election or referendum.

The report shall be presented to the Audit Committee or other relevant oversight committees and posted on PMI’s website.

Supporting Statement

As shareholders, we encourage transparency and accountability in our company’s use of corporate funds to influence legislation and regulation. PMI spent $9.8 million on lobbying in 2012, according to US Senate records. PMI’s Director of US Affairs also chairs the American Legislative Affairs Council’s (ALEC) Private Enterprise Advisory Council Task Force on International Relations. PMI does not disclose its payments for lobbying. Transparent reporting would reveal whether company assets are being used for objectives contrary to PMI’s long-term interests. At least 50 companies, including Entergy and Express Scripts, have publicly left ALEC because their business objectives and values did not align with ALEC’s activities.



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The Board recommends a vote AGAINST this proposal.

PMI engages in limited lobbying activities in the United States that are intended to promote the shared interests of our business, our shareholders and our employees, subject to a thorough review and oversight process and in compliance with applicable law. PMI does not engage in any “grassroots lobbying communications” as defined by the proposal. We do not make political contributions or maintain a political action committee in the United States and do not permit the organizations we support to expend funds to support or oppose candidates for U.S. elective office or to use payments from PMI as campaign contributions to any U.S. federal, state or local campaign committee.

Our policy is to comply with all applicable U.S. and international laws and regulations governing government advocacy activities and disclosure. We have effective compliance procedures for, and oversight of, our corporate lobbying activity. Advance approval is required before PMI becomes a member of, or renews a membership in, any organization that has a connection with governmental officials or political activity in the United States. Our Law and Compliance Department monitors, and our Corporate Audit Department audits, compliance with our policies, and our General Counsel and the heads of our Compliance and Corporate Audit Departments regularly report to the Audit Committee of PMI’s Board of Directors on compliance matters.

PMI’s lobbying activity in the United States is strictly regulated by federal law and by the law of the single state in which we are registered to lobby. These laws require public disclosure of the issues on which we lobby and our related expenses in compliance with applicable law.

On our Web site, www.pmi.com , we disclose our views on numerous legislative and regulatory issues. Our Web site also discloses our lobbying policies and provides a link to our federal and state filings that disclose the issues on which we lobby and our related direct and indirect expenses.

As discussed above, much of the information requested by the proponent is already publicly available. Preparing and maintaining the additional information requested by this proposal would impose unnecessary burdens and expend Company resources while providing little, if any, additional benefit to shareholders. We believe that our current disclosures, along with our internal compliance

and oversight processes, are appropriate and in line with the best interests of our Company and our shareholders.

Therefore, the Board urges shareholders to vote AGAINST this proposal.


Sara Britt, Coordinator of Corporate Affairs, on behalf of the People for the Ethical Treatment of Animals (PETA), claiming beneficial ownership of at least $2,000 worth of shares, submitted the proposal set forth below. The address and shareholdings of the proponent will be furnished upon request made to the Corporate Secretary. The Company is not responsible for the content of the shareholder proposal, which is printed below exactly as it was submitted.

RESOLVED, to reduce animal suffering the Board should adopt and publish a policy restricting animal use to tests explicitly required by law.

Supporting Statement

Our Company has recently published studies reporting the use of animals in harmful experiments despite no legal requirement that they be conducted and the existence of superior nonanimal testing methods.

In one experiment by our Company, nearly 700 animals intentionally bred to have an increased cancer risk were each confined in a chamber that exposed their entire bodies to tobacco smoke for six hours a day, five days a week, for five months. According to the authors, this exposure “would translate to approximately five packs of cigarettes per day for a human smoker.” 1 At the end of the study, the live animals were cut open, bled to death, and dissected. Our Company recently repeated these procedures with an additional 600 animals, extending the period during which they were forced to breathe cigarette smoke daily to as long as 18 months. 2 Our Company has also authored a number of other studies in which animals were forced to inhale cigarette smoke for long periods and then killed. 3 , 4 , 5

None of these deadly experiments were required by law.



Stinn W, et al. (2010). Toxicology 275: 10-20.


Stinn W, et al. (2013). Toxicol Sci 131 (2) : 596-611.


Boué S, et al. (2012). Artherosclerosis 225: 328-334.


Boué S, et al. (2013). Toxicology 314: 112-124.


Lietz M, et al. (2013). Artherosclerosis 229: 86-93.



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Imperial Tobacco, one of our Company’s leading competitors, states, “Imperial Tobacco does not commission or conduct research involving animals, and would not undertake such research unless formally required to do so by governments or by recognised regulatory authorities.” 6 Similarly, Altadis, one of the world’s largest tobacco companies, has stated, “We do not test anything on animals.” 7

Our Company can use exclusively nonanimal methods, combined with chemical analyses and research with smokers, to assess health effects of existing and new tobacco products. British American Tobacco has stated, “The use of in vitro [nonanimal] assays can overcome many of the problems inherent in the use of animal models…. For example, the use of human cells can negate the difficulty of inter-species extrapolation of results.” 8 Other industry scientists note, “[I]n vitro toxicology tests can be successfully used both for better understanding the biological activity of cigarette smoke... and for guiding the development of cigarettes with reduced toxicity.” 9

In light of the modern nonanimal test methods available, the humane policies of other tobacco companies, and the fact that more than 40 percent of the public opposes animal experimentation even for medical purposes, 10 it is imperative that our Company adopt and publish a policy restricting animal use to tests explicitly required by law.

We urge shareholders to vote FOR this proposal.

The Board recommends a vote AGAINST this proposal.

We believe that the actions requested by the proponent are unwise, unnecessary and detrimental to the Company’s strategic priority program to develop, assess and commercialize a portfolio of innovative products with the potential to reduce the risk of smoking-related diseases in comparison to cigarettes. To do so, we seek to substantiate a significant reduction of risk for the individual adult smoker as well as a reduction of harm for the population as a whole, based on robust scientific evidence derived from well-established assessment processes.

Our scientists believe animal research is necessary to substantiate the risk reduction potential of the products we are developing. For instance, the United States requires manufacturers to provide evidence that demonstrates that new products reduce the risk of disease in comparison to combustible products before

marketing such products. The Food and Drug Administration has published draft guidance outlining evidence, including clinical (human) and non-clinical studies, the agency expects manufacturers to provide when filing an application to market products with reduced-risk claims. The draft guidance confirms that research involving animals is an important component of the evidence necessary to establish that the products we are developing have the potential to reduce the risk of smoking-related diseases.

Furthermore, our scientists believe that animal studies should be conducted prior to the commencement of most clinical trials to demonstrate that novel products do not present new hazards to humans. This is consistent with approaches taken in other fields, and data from animal studies are often requested by review boards that approve clinical studies. The studies referenced in the proposal were limited to rats and mice and were among those we believe were necessary to conduct at this stage of our product development, in light of the state of the science and the expectations of regulators.

In conducting animal studies, we seek to ensure that the animals are treated humanely and responsibly and that all of our activities are performed in accordance with applicable laws and regulations, as well as internationally established best practices in laboratory animal care. For example, we voluntarily joined the Association for Assessment and Accreditation of Laboratory Animal Care, an organization with rigorous internationally recognized standards for animal care and use, and we earned its accreditation.

Specifically, we follow the widely-recognized principles known as the “3Rs” of animal research:



Replace — whenever possible, we use existing state-of-the-art approaches and methods to replace animal studies;



Reduce — we use the minimum number of animals needed to obtain valid results; and



Refine — we use the least invasive procedures to minimize pain and distress.






E-mail to a member of the public. February 11, 2008.


Breheny D, et al. (2011). ATLA 39: 233-255.


Andreoli C, et al. (2003). Toxicol in Vitro 17(5-6): 587-594.


Goodman JR, et al . (2012). Contexts 11(2): 68-69.



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We want to minimize the number of animals used in our research and are thus investing in the development of novel in vitro culture systems and in silico models (laboratory and computer studies that do not involve animals) with the aim of reducing the number of animal studies we perform.

In sum, we strongly believe it would be irresponsible to adopt a policy that would prevent our scientists from conducting studies that we believe, whether or not explicitly required by current law, are necessary to develop and market products with the potential to reduce the risk of smoking-related disease.

Therefore, the Board urges shareholders to vote AGAINST this proposal.




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The Board has adopted a policy, which is available on the Company’s Web site at www.pmi.com/governance, that requires our executive officers, directors and nominees for director to promptly notify the Corporate Secretary in writing of any transaction in which (i) the amount exceeds $120,000; (ii) the Company is, was or is proposed to be a participant; and (iii) such person or such person’s immediate family members (“Related Persons”) has, had or may have a direct or indirect material interest (a “Related Person Transaction”). The Corporate Secretary, in consultation with outside counsel, to the extent appropriate, shall determine whether a potential transaction with a Related Person constitutes a Related Person Transaction requiring review under the policy (including whether the Company or the Related Person has a material interest, based on a review of all facts and circumstances). If the Corporate Secretary determines that the proposed transaction constitutes a Related Person Transaction or it would be beneficial to further review the transaction, then, in either case, the transaction will be referred to the Chief Executive Officer or the Nominating and Corporate Governance Committee of the Board. In deciding whether to approve or ratify the Related Person Transaction, the reviewer is required to consider all relevant facts and circumstances. Based on the review of such facts and circumstances, the reviewer will approve, ratify or disapprove the Related Person Transaction. The reviewer will approve or ratify a Related Person Transaction only if it is determined that the transaction is not opposed to the best interests of the Company. All determinations by the CEO and Corporate Secretary must be reported to the Committee at its next meeting.


In addition to this policy, the Code of Business Conduct and Ethics for Directors (the “Director Code”), which is available on our Web site at www.pmi.com/governance, has specific provisions addressing actual and potential conflicts of interest. The Director Code specifies: “Our directors have an obligation to act in the best interest of the Company. All directors should endeavor to avoid situations that present a potential or actual conflict between their interest and the interest of the Company.” The Director Code defines conflict of interest to include any instance in which (i) a person’s private interest interferes in any way, or even appears to interfere, with the interest of the Company, including its subsidiaries and affiliates; (ii) a director or a director’s family member takes an action or has an interest that may make it difficult for that director to perform his or her work objectively and effectively; and, (iii) a director (or his or her family member) receives improper personal benefits as a result of the director’s position in the Company.

Similarly, the Code of Conduct of the Company requires all officers and employees of the Company to avoid situations where the officer’s or employee’s personal, financial or political activities have the potential of interfering with his or her loyalty and objectivity to the Company. The Code of Conduct lists specific types of transactions that might create an actual or apparent conflict of interest and provides guidance on how each situation must be handled.




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