I’ve brought up the topic of my dislike for Wal-Mart several times in discussions with friends. I mention this because I’ve found an online copy of a 60 minute program put together by a television show called Frontline. The 5 parts can be found for free here.
I thought the show picked up on a few interesting aspects of how Wal-Mart controls so much of the industry it participates in. However it never really talks about some of the disgusting practices Wal-Mart has employed in the past in order to maintain those low prices (and high profit margins).
Specifically I am thinking about the practice of taking out life insurance on employees, and making the corporation the benefactor. Often companies will do this for their CEO, as the case can be proven that if they were to die, the company would suffer financial harm. As such they take insurance out on their top dogs. The practice is called Corporate Owned Life Insurance (COLIs). However this practice was extended by companies such as Wal-Mart to the so-called peasants of the company – the entry-level employees, and the company would not inform the employees about these policies. These policies have been coined ‘dead-peasant’ policies.
According to this article Wal-Mart took out insurance on over 350,000 employees in around 1994 after choosing two insurance companies.
The beauty of the system at that time was that the premiums Wal-Mart was paying on these insurance policies was tax deductible, letting them save even more money. The HIPAA legislation that was created around 1996 removed this feature of the health insurance though, and Wal-Mart decided the practice was no longer profitable, so they began to cancel all policies.
However that did not stop them from collecting during this period of cancelling (4 years or so). Stories were presented in a class-action lawsuit against Wal-Mart wherein the spouse of a deceased employee was never even told by Wal-Mart that there was an insurance policy on the employee. Wal-Mart collected and walked away. She added her voice to the class-action lawsuit.
Wal-Mart is now suing the two insurance firms they chose to insure through, claiming that the whole point of this was to make money, and since the firms did not do their proper investigation into the effects of the HIPAA legislation, they were partly to blame and so should share in the costs of the fallout.
Now you tell me that Wal-Mart is all about getting low income people respect and dignity through employment. Yeah, right.
I know that the whole point of a corporation is to make money, but doing so on the backs and at the expense of the people who work the worst-paying jobs with the least benefits is not something i see as honourable or even something I can accept. As such I avoid Wal-Mart at all costs. I try to be a responsible consumer by spending my money in stores that (as far as I know) handle their employees as the resource they are – not as the cash mules that Wal-Mart apparently views them.
Anyhow, the Frontline videos are another interesting aspect of this corporate giant that sadly lives amongst us all.
Weird. But how is this on the backs of employees? Do they pay the premiums? This isn’t clear above, or in the article.
What I meant by that tone (I don’t think I used that term?) was that the corporation itself is not doing any work at all, yet they reap the benefits of the work/existence of their low-cost workforce.
They took advantage of the fact that they had a huge number of poorly-paid employees who work very hard at what they do. Have you ever seen Wal-Marts? They’re not the nicest places to work. But people endure it, for whatever reason, and the corporation took advantage of their lack of knowledge surrounding big corporate practices.
The employees do not pay the premiums, they are not even aware of the policies. It’s been said that a low-paid employee that drifted from job to job could have ended up having several policies on them at any one time, without knowing anything about it.
But the tone comes from the fact that the insurance was taken out because Wal-Mart was able to buy insurance by claiming that the employees were financially important to the corporation. Yet the employees were never given any compensation for their being important. So they gave the corporation something (other than their hard work) in return for nothing.
Ah, I feel like I’m turning into a raving capitalist. Some completely scattered and incoherent responses are below. Hurrah for procrastination!
You say the corporation itself (I guess it’s the shareholders, if Wal-Mart is publicly owned) isn’t doing any work at all, but if it weren’t for shareholders, the company wouldn’t exist, and none of those people would have jobs. Or maybe they’d have some other job, but I’m not sure where that would be. A different way of looking at the shareholders (the corporation) is that they provide the money, i.e., the tools, required to do the work at Wal-Mart, i.e., selling cheap stuff. If the employees have those tools themselves, they can set up their own store. Maybe some of these smaller, more local stores would be better and nicer, but my impression is that they don’t pay any better, and can be just as nasty as the big bad ones.
I wouldn’t want to work at Wal-Mart either, but people do work there. Unless they’re marched in at gunpoint then it’s their choice to work there. Yes, many would like to have another, better job, but most of us can probably think of a job that we’d prefer to the one that we have. Maybe (for some reason) we’d all like to be Bill Gates, but there can only be one Bill Gates. But we can only work at what someone is willing to pay us to do. The sad fact is that there are many people who don’t have enough skills for someone to want to pay them more than minimum wage. It’s not a happy thing, but it’s a fact. Again, I don’t know what a better alternative is. Do we double the minimum wage so that everyone gets what we think of as a dignified wage? So what then? Most likely, Wal-Mart and every other similar corporation lays off half its employees, and we suddenly have 20% unemployment. Yee haw. I’m reminded of a sweatshop in Bangladesh that was shut down because of North American and European outrage about child labour; a year later, something like half the kids who had been working there were working as prostitutes instead.
You say “the employees were never given any compensation for being important”. Not true, unless they were not paid.
I don’t know the nature of the insurance plan (maybe I should watch the documentary, but I don’t have five hours to spare; only 20 minutes to ramble on your blog). My guess is that it would involve a small payoff to the company to compensate for having to find a new worker. I don’t know why this is offensive. If they pulled in millions from having an employee die, that might be a different story, although again, I don’t see any cost to the worker him/herself.
My other guess is that the premiums would be tiny per worker, and so even if Wal-Mart decided to be wonderful and generous and give the workers the money that they were spending on the insurance premiums, it would probably amount to a couple of pennies each day.
Anyway, I know very little about Wal-Mart. My impression is that they bully their employees and maybe everyone else that they deal with, and I wouldn’t want to work there. I don’t shop there, either. But this insurance thing in and of itself is just not that offensive to me. There are real costs to a company when one of its employees dies, and I don’t see why they shouldn’t be able to protect themselves from that cost. I’d be curious to know how many other companies have similar systems in place, but they don’t get shat on about it because they’re not Wal-Mart.
So let me get this straight – you won’t shop there. You won’t work there. The insurance thing is not *THAT* offensive, so you defend them?
My god man, you are living at a university, surrounded by rebellious grad students, and that’s your state of mind?
Your counter argument kinda falls apart – you think Wal-Mart should be protected from the death of one of their employees? So exactly how much do they suffer when the box cutter working in the back dies? Compare that to that person’s family and friends. Now you’re suggesting that the insurance on that person’s life should be rewarded to the corporation, because they suffer financially? Hundreds of thousands of dollars financially?.
Yes, I agree, Wal-Mart is the one paying the premiums. But don’t forget, they were doing it as a tax shelter, meaning they ended up paying less in taxes because they took this insurance out. They also refused to inform the employees that they were insured. Many employers offer benefits to their employees wherein the employer pays out so the employee doesn’t have to. A medical plan is an excellent example. Wal-Mart isn’t going to benefit from someone visiting their doctor with a cold, but they pay out. It’s a benefit – something to reward and attract employees. Insurance is another benefit – a reason why working for Wal-Mart rather than J.C Penny may make sense to a prospect. The difference here is that the employee doesn’t benefit at all, Wal-Mart does, without the employee or their family ever knowing. That’s dirty.
I’m not sure this is something I can convince you of. You’re either disgusted by the practice, or you’re not. I suppose it is the same as cannibalism in that sense – disgusting or not. Welcome to a binary world!
Wal-Mart is not “being protected” — they’re protecting themselves. The hiring process costs money, and I see no reason why the company should not be able to insure themselves against that.
Of course the family suffers much more than the company when a family member dies. Most of this suffering can’t be addressed by insurance or money. But the “financial suffering” (funeral costs, lost income, etc) should be offset by personal life insurance. This is not my employer’s responsibility — it’s mine. Unless my employer wants badly enough to keep me around, in which case they’ll contribute to my insurance.
Companies do contribute to benefits for employees in many situations, and as you say, this is to reward and attract employees who might otherwise work elsewhere. But if people are willing to work the job without receiving those benefits, there is no incentive for Wal-Mart to give those benefits, unless they’re just really swell people and want to be nice to everyone. So maybe whoever makes these decisions at Wal-Mart decides to double everyone’s pay and give lots of cushy benefits. Wal-Mart’s costs go through the roof, shareholders start bailing out, stores start to close, and suddenly lots of people are out of work.
The world is not binary. 😛 And don’t get me started on cannibalism….
Whoops, Dale said that people are ‘willing’ to work at Wal-Mart. Do you honestly think that Wal-Mart is he employer of choice for people? Perhaps there other, shall we say … factors, involved in people’s choice to work there?
Obviously we disagree. I see this as a corporation abusing a system for its own benefit without giving the object of the abuse any hint of the rewards being reaped. You see it as standard corporate practice that makes good fiscal sense. Perhaps I hold corporations to a higher level of standards than you do. I do not think the dollar should be the bottom line. I don’t think purposely abusing your employees in order to keep prices down is acceptible. I don’t think corporations should be allowed to pretend to value employees only to turn around and treat them like crap.
I guess you disagree.
The law makers of the U.S. found the practice abhorrent enough to make it illegal, but we all know how crazy and liberal-thinking those U.S. lawmakers are down there.
Now stop using those smilies 🙁
Of course Wal-Mart is not the employer of choice for most people. Most of us would like a job where we get a thousand dollars a day for doing crap-all. But we can’t. So we work at what we can get, and what people are willing to pay us to do. If you can think of a better alternative, please spell it out.
If the company is making thousands of dollars in profit when one of their employees dies, I would find that offensive and exploitative. But if they cover the costs that come with replacing that person, then I see nothing wrong. Those costs are internal to the company and I don’t see how they affect the family of the employee.
I agree that corporations should not be allowed to treat people like crap, but I think we disagree on what constitutes crap-like treatment.
As for smilies, I didn’t put in a smiley, I put in a colon, a hyphen and a P, to signify the tongue out. It looks more like a grin. But you’ll get no more smilies from me.
PS. 🙂 🙂 🙂 🙂 🙂 🙂 🙂 🙂 🙂 🙂 🙂 🙂 🙂 🙂 🙂 🙂
Kirk,
I work at the corporate level for Wal-Mart Stores, Inc. and you my friend, are so incorrect. I guess you have spent your time time in Bentonville, AR inside the corporate world to determine all of your information above?? Until you have obtained a degree and job, please make sure your facts are correct before spouting off to the world your ignorance. There is a reason we have over 2 millon people working for our wonderful company!!!!!!!!!!!!!!!!
Regards,
John
Thanks for your thoughts John. Please note that you’re commenting on a post I made over 3 years ago, and I can’t vouch for whether or not these things are true anymore.
I can say that I think Wal-Mart is doing a lot of good in terms of sustainability at a corporate level – so they can’t be all that evil.
After spending the past 3 years working at that job you so thoughtfully recommended I “obtain” (unless you meant getting a job at Wal-Mart?) I have to say that my understanding of corporate practices is still quite biased against the corporations. I’ve come to understand that things are rarely as simple as they seem to be, but I still believe that capitalism itself is the devil, of which Wal-Mart is a very big part. But I digress.
Thanks for all the exclamation marks too! Very generous.
I would like to say i too work For Wal-mart Corp, However I work for Canada, In Home office, or as you would call it Corporate Office. Wal-mart Is hit b/c it is the retail power. I started out of highscholl, worked up, went to university paid my Wal-mart, and am where I am, before you slam and make alligations against Companies and there Staff, Get the facts, Source them and show the real story rather then filling the air pockets of false information into peoples heads.
Thanks Jane,
I’m all for fact finding. The post was about some facts that I had come across. I’m aware that media today is quite untrustworthy, but those are the facts I had come across.
If you have any other sources of facts, I’d love to read them. As I noted to John I’m also open to the idea that 3 or 4 years ago there may have been facts that are no longer true.