It came as sort of a shock to me the other day when I came across the article in Fortune titled, “The many ways companies profit from hastening employees’ deaths.” What I took away from it was that companies are taking out life insurance policies on their employees and in return collecting the benefits when they die. Creepy!
It is disgusting knowing that once a worker dies, the company receives millions of dollars in their absence. To me, it would create an illusion that the CEO is sitting at his desk casually marking days off the calendar until his or her employee finally kicks the bucket. The Fortune article mentions that companies can speed up the deaths of their employees by increasing the individuals’ workload which in turn means no sleep, no family time, and a short life span for the individual. Literally the saying “working oneself to death” is put into play. Yikes.
Corporate Life Insurance Policy Benefits
Most disturbing is the fact that these insurance policies are literally for LIFE. The policies tend to be whole life, meaning companies stand to collect money not just from the death of their current employees, but from their ex-staffers as well. It would seem that a person’s death was being viewed as a moment of celebration, not mourning. What is this, The Hunger Games?
There are a couple of legitimate reasons as to why a company would want to take a life insurance policy out on key employees. First being the tax-free proceeds that are received after the death of the key person which can be used to cover any future costs, such as employee replacement. The insurance policy can also cover employee benefit liabilities. Then there’s the less legitimate benefit to after-tax net income. This benefit arises when the cash value of the policy is larger than the premiums paid. Many companies are only after this monetary gain, but at what cost?
Let’s look at one of the huge Wall Street mega banks as an example. The multi- billion dollar corporation recently had a news outlet write about a parade of “suspicious” deaths was being reported in 2014. Five young male employees in their 30’s as well as a former employee aged 28, had died in what seemed to be mysterious circumstances. The article notes that four of the banks likely hold over “$680 billion face amount of life insurance on their workers, payable to the banks.” Now correlation does not always imply causation, but it is hard not to draw a line from the deaths to the billions of dollars in insurance coverage the company would be receiving. When officials of the big New York bank were interviewed about these suspicious deaths, the institute reported saying the information constituted “trade secrets.”
Ethical Rather Than Financial
The bottom line is that the problem of companies benefiting from the deaths of their employees is seen as more of an ethical problem than a financial one. In a New York Times article, the author suggests that critics believe that it is immoral for companies to profit from the death of their employees. At least New York’s daily and top noted newspaper is commenting on the idea that this procedure is unethical and fraudulent.
In 2006, Congress passed the Pension Protection Act which would include best practices for companies taking out life insurance policies. The act imposes a limit on the amount of life insurance the company can take out of the employee’s income. While the company does collect money, the employee has the option to take out life insurance for themselves in order for their families to benefit as well. So while it may not necessarily be a huge financial burden, it raises ethical eyebrows.
Is it right for the company to benefit from the death of its employee without his or her consent? What it comes down to is that the managers are partaking in insurance fraud. They are taking out life insurance policies without the consent of their employees. This problem could be resolved by supplying managers with anti-fraud training that specifically addresses this unethical practice. The rules regarding corporate ownership of life insurance are somewhat more complex than for individual policies. Many managers are unaware of these rules, which could be addressed with appropriate training. Your managers need to be aware of anti-fraud policies and prevention programs in order to avoid potentially brand-damaging fiascos, like the New York bank scandal.
Protect Yourself with Anti-Fraud and Compliance Training
Anti-fraud training is a great tool for managers who are unaware of fraud policies and laws. Anti-fraud training is intertwined with a great ethics and compliance training program. A typical ethics and compliance training program covers everything from anti-bribery laws to harassment and discrimination in the workplace. As the regulatory environment continues to grow, it becomes more important for corporations to establish a program that will help employees and managers understand new policies and laws, including fraud policies. Managers may not be aware that they are committing any type of fraud because they haven’t had the necessary training. Life insurance used to be straightforward, you purchase it and you are offering security for you and your loved ones. Now, there is so much controversy over company-owned life insurance that it is important for your managers to know the litigation and regulatory notions associated with these policies. Having a great ethics and compliance training program is the first step in preventing insurance fraud and encourages early reporting for incidents I mentioned above. With ethics and compliance training such a huge part of an organizations’ success, it becomes necessary to cover all ethical bases upon training managers as well as employees.