A Worse Variant of a New Species of Conflict of Interest

We recently commented on a New York Times article that revealed that Virginia Commonwealth University got a research grant from the tobacco company Philip Morris, a grant which gave proprietary control of any research results to the company, not the academic researcher, and required the grant itself to be secret.

It turns out that VCU has more extensive ties to the tobacco industry. In particular, first the Medical Writing, Editing and Grantsmanship blog, then the Richmond, VA publication Style Weekly reported that the president of VCU, Eugene Trani, is on the board of directors of a tobacco company (not Philip Morris). From Style Weekly,

As a member of the board of directors of Universal Corp., Trani receives an annual retainer of $40,000, including stock options. He also receives a fee of $2,000 for each board of directors’ meeting he attends and another $1,500 for attending committee meetings.

Based in Richmond, Universal Corp. is a leaf tobacco merchant and processor. The company’s Web site describes its operations as 'selecting, buying, shipping, processing, packing, storing, and financing of leaf tobacco in tobacco growing countries for sale … throughout the world.'

Though it does not manufacture cigarettes, the Web site says 'the Company’s revenues are derived from sales of processed tobacco and from fees and commissions for specific services.'

Actually, Style Weekly understated Trani's financial ties to Universal Tobacco. In fact, according to the company's 2007 proxy statement, in May, 2007, Mr Trani held 12,642 shares of company stock (including shares which he had the right to acquire via options within 60 days of May 25, 2007). His total director's compensation in 2007, including fees and stock options, was valued at $117,575. He held 6000 stock options valued at $41.88 per share (thus worth $251,280). Finally, his aggregate balance of his director's retirement plan was $321,740.

Style Weekly quoted a VCU spokesperson who thought that Trani's board service was irrelevant:
'I don’t see any connection between these two,' university spokeswoman Pam Lepley says. 'And his being on the board doesn’t really pertain to the university.'

Similarly, an editorialist for the Richmond Times Dispatch shrugged off this new development. However, in my humble opinion, it really is important.

We have previously discussed conflicts of interest incurred when the leaders of health care organizations also serve on the board of pharmaceutical, biotechnology, medical device companies and the like. The issue goes beyond just the often generous payments board service entails. The important consideration is that directors of public for-profit corporations have a duty to "demonstrate unyielding loyalty to the company's shareholders" [Per Monks RAG, Minow N. Corporate Governance, 3rd edition. Malden, MA: Blackwell Publishing, 2004. P.200.] It would seem that the conflict created when the president of a university to whom a medical school and academic medical center report also is the director of, for example, a pharmaceutical company is obvious.

I have not previously heard of case in which the leader to whom a medical school or academic medical center report who also leads a tobacco company. That of Mr Trani appears to be the first case reported of this worse variant of what we once called "a new species of conflicts of interest."

It seems to me that the conflict created by this situation is much worse than that of, for example, a university president who also is on the board of a pharmaceutical corporation. At least pharmaceutical, biotechnology, and medical device companies make products that are intended to provide more benefit than harm to patients. Tobacco companies make products that increase the risk of severe medical problems, but provide no medical benefits. It does not seem ethical for a medical school or academic medical center to report to someone with a fiduciary duty to increase the profits of a company that facilitates the making of such products.

Thus, Dr Trani's "being on the board" of Universal Corporation pertains most seriously to Virginia Commonwealth University, particularly to the VCU School of Medicine and VCU Medical Center. They ought not to be lead by someone with "unyielding loyalty" to the shareholders of a tobacco company.

(Note, for the purposes of full disclosure, that I am an unpaid, adjunct faculty member in the Department of Internal Medicine of the VCU School of Medicine of Virginia Commonwealth University.)

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