Like most retailers, CVS has a very strict policy on proper conduct with trading partners including clear policies preventing buyers and other company officials from accepting gifts from suppliers. The goal of the policy is to keep the playing field even and not give particular manufacturers undue sway over product decisions, shelf space, promotions, display activity, etc.
Now, a Wall Street Journal report brings into question whether some vendors have been able to buy their way into the good graces of the chain by spending thousands of dollars to support the company's annual golf tournament, the CVS Caremark Charity Classic.
According to the report, some CVS insiders see the tournament as a "pay to play" system that favors those companies that donate the most to support the event. CVS takes issue with any such characterization claiming, "Participation in the event each year is optional and does not affect our vendor selection process."
The tournament is championed by CVS CEO Tom Ryan, who according to WSJ, is rated by Golf Digest as one of the top golf-playing CEOs in the country.
Vendors such as QMI Security Solutions, a company that sells security grates to CVS, see the tournament as a means to connect with the chain on a more relaxed level without concern about violating any rules of conduct.
"In today's marketplace, giving gifts to any company's employees -- you can't do it," Jim Miller, president of QMI Security Solutions, told WSJ. "At Wal-Mart today, you can't buy them lunch. Here, you have that opportunity to do it in a very nice setting where you are appreciated and discuss business. When you get done [on the course], the whole company is there with you."
Some vendors such as KKM, a broker for manufacturers without a direct sales force, has been a sponsor of past tournaments and recently purchased a vacation package that was auctioned at the event that included a trip for to the private Carnegie Abbey Club on Narragansett Bay in Rhode Island. According to the auction program, the trip also included "two CVS Caremark executives of your choice as your guests." KKM, according to the report, paid at least $50,000 to secure the vacation package with the CVS execs.
John Malmborg, president of KKM, said, "I take advantage of this Classic, asking the different manufacturers I work for if they want to participate. They all chip in and we work to get to a high level of participation and have access to CVS executives on an informal basis. It really is helpful."
While the retailer and suppliers maintain everything is above board at the tournament and no quid pro quo exists, others such as Michael Levy, director of the Babson College Retail Supply Chain Institute, suggest that the appearance of impropriety is about as bad as the actual thing. Buying trips for customers, he said, places CVS and its vendors into an area colored by "shades of unethical" behavior.
Allowing company employees to accept anything beyond a gift of minor value, he said, "starts corrupting people's judgments."
Discussion Questions: Do you think that CVS is playing with ethical fire with its annual charity golf tournament? Is there reason to question whether those vendors that contribute to the event may be getting better treatment from the chain than those who choose not to participate or who do so on a much more limited level?