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Objectives. To better understand how the tobacco industry responds to tobacco control activists, we explored Philip Morris's response to demands that consumers in developing countries be informed about smoking risks, and analyzed the implications of negotiating with a tobacco company. Methods. We reviewed internal tobacco industry documents and related materials, constructed a case history of how Philip Morris responded to a shareholder campaign to require health warnings on cigarettes sold worldwide, and analyzed interactions between (1) socially responsible investment activists, (2) Philip Morris management, (3) institutional investors, and (4) industry competitors. Results. After resisting for 11 years, Philip Morris unilaterally reversed direction, and proposed its own labeling initiative. While activists celebrated, Philip Morris's president detailed privately how the company would yield little and benefit disproportionately. Activists portrayed the tobacco industry as preying on the poor and uneducated and used delegitimization to drive a wedge between the industry and its financial and political allies. When Philip Morris 'gave in' to their demands, it exchanged negative publicity for positive public relations and political credibility. Conclusions. Tobacco companies can appear to accommodate public health demands while securing strategic advantages. Negotiating with the tobacco industry can enhance its legitimacy and facilitate its ability to market deadly cigarettes without corresponding benefits to public health.