Practice and Review

James Stilton is the chief executive officer (CEO) of RightLiving, Inc., a company that buys life insurance policies at a discount from terminally ill persons and sells the policies to investors. RightLiving pays the terminally ill patients a percentage of the future death benefit (usually 65 percent) and then sells the policies to investors for 85 percent of the value of the future benefit. The patients receive the cash to use for medical and other expenses, and the investors are “guaranteed” a positive return on their investment. The difference between the purchase and sale prices is Right Living’s profit. Stilton is aware that some sick patients may obtain insurance policies through fraud (by not revealing their illness on the insurance application). An insurance company that discovers such fraud will cancel the policy and refuse to pay. Stilton believes that most of the policies he has purchased are legitimate, but he knows that some probably are not. Using the information presented in this chapter, answer the following questions.

1. Would a person who adheres to the principle of rights consider it ethical for Stilton not to disclose the potential risk of cancellation to investors? Why or why not?

2. Using Immanuel Kant’s categorical imperative, are the actions of RightLiving ethical? Why or why not?

3. Under utilitarianism, are Stilton’s actions ethical? Why or why not? If most of the policies are, in fact, legitimate, does this make a difference in your analysis?

4. Using the IDDR approach, discuss the decision process Stilton should use in deciding whether to disclose the risk of fraudulent policies to potential investors.

Debate This

1. Executives in large corporations are ultimately rewarded if their companies do well, particularly as evidenced by rising stock prices. Consequently, shouldn’t those who run corporations be able to decide what level of negative side effects is “acceptable” for their companies’ products?