It looks like Bank of America didn’t learn from Wal-Mart’s mistakes.

Just like Wal-Mart has done in years past, BOA is now taking out life insurance policies on it employees and listing itself as the primary beneficiary in order to fund executive compensation. According to an article in today’s Wall Street Journal:

The insurance policies essentially are informal pension funds for executives: Companies deposit money into the contracts, which are like big, nondeductible IRAs, and allocate the cash among investments that grow tax-free. Over time, employers receive tax-free death benefits when employees, former employees and retirees die.

Known as “dead peasant” insurance, Wal-Mart took out Corporate-Owned Life insurance (COLI) policies on unsuspecting employees until 1995. Even thought Wal-Mart stopped taking out new policies at this time, it continued to cash in on them years later. In Texas and Oklahoma, Wal-Mart paid $15 million to settle claims it did not have an insurable interest while taking out these policies. Michael D. Myers, an attorney who has represented workers on these types of cases, had this say about employers using these policies in a July 2007 Tampa Tribune article:

Creepy’s a good word for it...If you ask the executives that decided to buy these policies and the insurance companies that sold them, they would say this was designed to create tax benefits for the company, which would use the benefits for benevolent purposes such as buying employee medical benefits.

Despite widespread condemnation and lawsuits surrounding the practice, some companies never learn. Bank of America—in perpetual hot water for its roll in the financial crisis—decided it was a good idea to cash in on some of the $400 billion in death benefits consultants believe banks will get over the next few decades.

Many people feel that companies should not profit off the death of its employees. Nevertheless, government intervention and regulation has been slow to occur:

Efforts to rein in the practice largely have been unsuccessful, including the most recent rules Congress enacted in 2006. The rules limit companies to buying life insurance to just the top third of earners, who must provide consent. But the rules don’t apply to life-insurance that employers bought before the August 2006 rules, which cover millions of current and former employees. (WSJ)

With executive compensation out of control, Bank of America should rethink taking out these policies. Not only for the positive press, but to restore a good faith relationship with its employees - who are not doing as well as the executives.

Banks Use Life Insurance to Fund Bonuses [Wall Street Journal]:

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It’s time for the latest addition of Wal-Mart Watch’s speak out round up. As workers continue to write to us about their experiences with Wal-Mart, we’ll make sure to highlight some of the best submissions of the week. The following employee comments address layoffs, disrespect for loading dock workers, the plight of seasonal Wal-Mart employees, and inadequate bonuses. 

The wife of a former Wal-Mart worker from Arkansas write to us about the questionable layoffs at the company’s home office:

“I am writing about the 700-800 layoffs that Wal-Mart/Sam’s Club did back in February 2009. I am infuriated with the way the company – who just happened to post record profits this past year – says that economic turmoil forced them to cut jobs. As the wife of one of these employees, I can honestly say that these last 10 weeks have been painful. To see your husband, who worked with the company for over 13 years, struggle to find a job to support his family of seven has been very difficult. I would like to know why Wal-Mart is posting openings at its corporate offices just weeks after the layoffs. Was this their way of getting cheaper people? Why couldn’t they help with job placement for the displaced workers? Now it seems like Wal-Mart is only looking out for the pay of executives and the Walton Family. Sam Walton’s family company has turned to evil greed, and I am sure that he is rolling in his grave...This company needs to be stopped. Why won’t the government penalize companies that post record sales, and then lay off so many dedicated employees? Wal-Mart is only hurting families so that higher up people can collect more compensation. Please help stop WAL-MART!!!”

A Wal-Mart worker from Pennsylvania writes to us anonymously about life on a Wal-Mart loading dock:

“I work unloading trucks at my store, and we are definitely at the bottom of the barrel.  We are severely understaffed, and find ourselves - at least once a week - unloading a large truck with just a few people. Normally, it would take six people a few hours to unload this truck.  We are harassed by managers saying it should be done faster and blatantly insulted by overnight stock employees who do half the work we do and get paid twice as much.  I know why they don’t want us to discuss our pay rates - it would make me sick.  Why are there overnight stockers who make $11 an hour doing next to nothing half the night...when I’m making $8 an hour doing four people’s jobs, often getting two hours of overtime a night (and being chewed out for that as well, I might add.)

I understand the rule in this store; the more you do, the less you make.  Morale is non-existent. I refuse to stand by and watch my fellow coworkers, who work just as hard as I do, be insulted and harassed and treated like garbage by people who are paid more and do less.  Hire more people and quit setting unrealistic expectations of those you have, Wal-Mart.  Or else soon, you won’t have anyone.”

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