Dead peasants, conflicts of interest and Immanuel Kant

In an unforgettable exchange in Michael Lewis’s wonderful book Liar’s Poker a Wall Street executive tosses a ten-dollar bill to a salesman who is heading for the airport and whom he tells to “take out some crash insurance for yourself in my name.” The salesman asks, “Why,” to which the executive replies:  “I feel lucky.”

A story in today’s NY Times reported on a growing business in company-owned life insurance – in which a worker’s life is insured with the company as the beneficiary:    “Because so-called company-owned life insurance offers employers generous tax breaks, the market is enormous; hundreds of corporations have taken out policies on thousands of employees.”  There has been some effort to rein this business in: under “a law enacted in 2006 … [which] sought to curb the practice — companies now are restricted to insuring only the highest-paid 35 percent of employees, who must give their consent.”  However, this type of insurance “remains a growing, opaque and legal source of corporate profit” – and something that, understandably, can be unsettling to those whose lives are insured for the benefit of their respective employers.  Indeed, it has even earned a colorful sobriquet:  “’dead peasant’ insurance, an allusion to Nikolai Gogol’s novel ‘Dead Souls,’ in which a con man buys up dead serfs to use them as collateral in a business deal.”

Certainly if an employee was betting against her employer that would be considered a conflict of interest (at least as a general matter).  This is presumably why some companies’ policies prohibit employees’ short selling of company stock, irrespective of insider trading concerns.   However, a COI-based line of analysis is a non-starter here because – at least in the US – employment-based fiduciary duties are largely (and starkly) asymmetric: employees owe duties of loyalty to their employers, but not the other way around.

But that’s  not the end of the ethical inquiry, as deontology  – the school of moral reasoning founded by Immanuel Kant,  which provides much of the foundation for modern business ethics – instructs that you should “[a]ct in such a way that you treat humanity, whether in your own person or in the person of another, always at the same time as an end and never simply as a means.”  And, while in the rough-and-tumble world of modern capitalism there may be many close calls with respect to application of this principle, dead peasant insurance seems pretty far over the line to me. Indeed, I was going to add that this is a practice that almost calls out for a modern-day Gogol to capture fully its moral ghoulishness – except that it might be hard to improve on Lewis’s non-fiction version.


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