Thursday, May 21, 2009

The Big Boys Get Different Rules

The statement in the title of this entry should come as a surprise to no one, but the Wall Street Journal provided us a reminder yesterday of just how different those rules are.

Businesses have always purchased life and disability insurance on their executives and key employees.  That just makes good business sense.  The loss of such a person puts a serious dent in operations.

Now suppose you have a small business.  You might think all your employees are key, and there's some merit to that.  It's certain, though, that you have an employee or two other than management who are crucial.  Where would you be without that secretary who knows all the "informal" procedures and can get that vendor to deliver tonight instead of tomorrow?  She's definitely key to your operation, but if tried to insure her, the insurance companies would tell you that you don't have an insurable interest and reject you.

That isn't what they tell the big boys, though.  Outfits like Bank of America, Chase, AIG, and yes, even dear old Zions routinely insure not only their executives but their lackeys and spear-carriers and use the proceeds to fund executive compensation (Check the Journal article I've linked to for information on a case a Zions subsidiary is embroiled in.).

Let's face it, folks, the system is broken, an no one who's been allowed to have a set of tools is inclined to fix it.  Running the game with two sets of rules is bad.  Enhancing revenue by betting on employees' deaths is worse (Not to mention the conflicts of interest.  I wonder how many of those deaths were caused by work-related risks?).  Using that revenue to fund executive perks is off the charts.

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