Just how bad is being a CEO in big tobacco?

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In 1994 the CEOs of the largest tobacco companies all testified before congress that they thought nicotine was not addictive and were widely mocked. How much were they paid relative to the damage they were doing?

Last year I wrote about the most harmful careers and had encouraging smoking at the top. But how bad is it exactly?

Two researchers recently put together some data that can help us estimate this and the numbers are pretty remarkable.1

They compared the number of deaths caused by a cigarette company with the amount the CEO was paid. For this they used market share in the cigarette industry as a proxy for harm, and the WHO’s old estimate that 5.6 million people die due to cigarettes each year – now up to 6 million.

Doing some calculations, it looks to me like across the companies they could track, which collectively make up 45% of the global market, CEOs are paid $23 for each premature death resulting from the existence of their firms.

Note that there are other moral and practical reasons not to take jobs that do harm, but here we will focus just on the direct damage caused.

The authors draw a comparison to the life-saving treatments available if these CEOs wanted to make up for their harmful work by donating to charity:

If it is assumed that all of the CEOs analyzed are attempting to maximize their income in order to give to charities to save lives [25], these low [salary per death] values become even clearer. GiveWell, an organization devoted to calculating the effectiveness of charities, found that one of the most effective charities is the Against Malaria Foundation, where it costs approximately $3,400 to save a human life [26]. What this means practically is that even if their entire compensation was directed at saving lives, the CEOs do not earn enough money to make up for the lives lost from selling their companies’ products.

This makes the mistake of not thinking about ‘counterfactual impact‘: a good CEO isn’t responsible for all of their firm’s success.

How much does a CEO matter to firm performance? It’s hard to say, but one estimate puts it at 20% today based on share price changes. Let’s say the top choice for CEO will raise sales 5-40% relative to their next best alternative.2 In that case, these CEOs are actually being paid $60-$460 for each death resulting from the cigarettes they cause to be sold. I sure hope they enjoy spending that money.

For our purposes though, we don’t care when one tobacco company takes market share from another, only when they cause someone to smoke who otherwise wouldn’t have. I don’t know how much tobacco CEOs today try to push sales to new smokers, or discourage smokers from quitting, versus poach customers from other brands, but for the sake of being able to progress, let’s say it’s half and half.3 That raises our estimates to $120-$920 paid in salary for each death.

Furthermore, a premature death due to cigarette consumption isn’t quite as bad as a death due to malaria, because people usually die of tobacco use after the age of 50, while most malaria deaths occur below the age of 5.

To make this comparable we need to talk about how many years of loss of healthy life are caused by each option. The WHO estimates imply that smokers have an average of ten fewer years of healthy life – this translates to roughly half of smokers dying of ‘smoking-related causes’, and members of that group living 20 fewer years of healthy life on average. This is consistent with other estimates of smoker life expectancy. By contrast, preventing the death of a child from malaria probably lengthens their life by more like 60 years.4

We now have what we need to estimate the impact of a hypothetical tobacco CEO who earns $1 million and donates every penny to malaria prevention at the Against Malaria Foundation:

  • Their direct work causes 22,000-165,000 years of healthy life to be lost each year.5
  • Their donations would cause 20,000 years of healthy life to be gained.6

In an optimistic case they may be able to undo the direct negative impact of their work and ‘break even’. If they are making a significant contribution to their firm relative to their replacement, it’s more likely that their work causes significantly more ill-health in the world.

The original conclusion of the paper probably holds up, though in a much weaker form.

In evaluating this hypothetical tobacco CEO, a key moral consideration is the following:

  • Is it worse to cause someone to die by making cigarettes more available and appealing to them, assuming they know about and accept the risks involved in smoking; or, because you failed to save their life from a preventable illness, when you easily could have?

There are arguments either way and such philosophy is beyond the scope of this blog post.

The key point I want to highlight is that there are very likely jobs such as this, where even considering ‘replaceability’, and even if you donate all your earnings effectively, it would not be enough to offset the direct harm done.

If you are trying to do the most good by earning to give, you will probably do better by looking for a job that both pays well, and has either neutral or positive direct impacts.

Notes and references

  1. Note that I had to make a major correction to one salary, so you won’t be able to replicate these figures.
  2. Admittedly share price and sales are not the same - share price increases might increase sales if they are driven by declines in cost; on the other hand sales might outstrip increases in share prices if driven by more competitive pricing. However, in a commodity industry like cigarettes, share price and sales are likely to track one another fairly closely.
  3. It's probably much worse in developing countries compared to rich ones, because there are more new potential customers, and you make less profit from each smoker because sale prices are lower.
  4. It’s common to ‘discount’ this figure to 30 years, but personally I see little reason to give less weight to years of life gained in the future relative to today.
  5. $1,000,000 salary / $120 per death * 20 years per death. $1,000,000 salary / $920 per death * 20 years per death.
  6. $1,000,000 salary / $3,000 to save a life (2015 estimate) * 60 years per life saved.

Author: Robert Wiblin

Rob studied both genetics and economics at the Australian National University (ANU), graduating top of his class and being named Young Alumnus of the Year in 2015.

He worked as a research economist in various Australian Government agencies, and then moved to the UK to work at the Centre for Effective Altruism, first as Research Director, then Executive Director, then Research Director for 80,000 Hours.

He was founding board Secretary for Animal Charity Evaluators and is a member of the World Economic Forum’s Global Shapers Community.