Last May DE shaw fired managing director Daniel Michalow. The reasons are obtuse, but there is some allegation to inappropriate behavior with female colleagues. Of course, Michalowe defended himself by saying he is definitely an idiot but not a pervert.
However, the situation gave us a glimpse of the internal workings of David Shaws home which revealed a hedge fund that was closed and retiscent to share information with the public. In the end, it appeared like they were guilty of covering up hedge fund misbehavior.
Now, a year and some later, DESCO is still working to cover up the fall out from the issue, and its taking a firm stand to its approach to the future.
DE Shaw employees now have to agree to new non-compete terms. If employees refuse to formally agree to these terms, they will be terminated – although they are allowed to keep their saved compensation they have acquired from the company, which would normally be forfeit upon other types of termination. The company manages more than $50bn in hedge funds and that is a significant determinator in employees decision on whether to sign the new agreement or not. This is probably the reason why the company has informed staff that this new agreement is meant to make DE Shaw regulations uniform and help employees perform better practices.
Why are Employees Asked to Sign the Agreement Now in September?
The agreement went into effect on September 16 which is when Mr. Michalow is free to hire or partner with DE Shaw employees and create a new hedge fund. Mr. Michalow stopped working for the company on March 15, 2018. This means that the restrictions on interference clause in his employment contract expires 18 months later, which was in September of this year.
This coincidence seems incredibly strange. If Michalow was really such a criminal and could not remain employed why would DE Shaw want to close the door on its investment gurus. There is no confirmation that this is a defense step taken by DE or that their information will loosen but it is an interesting coincidence.
It’s hard to imagine that people will walk away. It is more likely that they will stay with the company and see what happens. However, the downside here is that a few of the PMs may just quit and take their compensation. According to some sources, the leadership committee is looking for loyalty from the group, but some people are wondering what happened to cause this.