Shareholder Wealth Maximization in Action
From the WSJ comes an article about how the slow flu season hurt the profits of some companies. The article quotes several executives complaining that Americans (initial) resistance to illness hurt their balance sheets.
Thus, Walgreen CEO Jeffrey Rein, speaking to shareholders, said “If attendees of the meeting needed to cough, he joked, they should leave the room and ‘go to a movie theater or on a bus’ to spread their germs. ‘We’re really hoping for a very strong flu season’.” While P&G CEO A.G. Lafley said on a quarterly analyst call: “Unfortunately, people have not been getting sick at a rate that we would all like yet.” Finally, LifePoint Hospitals CFO David Dill mused that “You have a strong flu season, and the ancillary business is very profitable . . . On the pediatric side, young kids coming into the hospital, that’s a nice margin for us, as well.”
I’ve got to think that these officers wish they could take some of this back, at least as phrased. And as reader S.B. pointed out, Rein’s comments in particular raise red flags. I think it fair to assume that most OTC remedies for the winter flu are sold to concerned parents, despite the recent recall and health warnings. If Walgreen’s intends to profit off of the flu season, and in particular in the sale to parents of potentially harmful meds, plaintiffs lawyers should smell blood in the water when bad outcomes occur.
Further, I think the article highlights how invested sectors of the economy are in a status quo of reactive, medicated, health care delivery. I don’t mean to be dramatic, but it is worth pointing out that there is quite a bit of money (not to mention employment) riding on the continuing dysfunction of the health care system.