DE Shaw’s Woes Are No-Where Near the End
DE Shaw has been on the limelight for struggling to streamline its business operations after change in top leadership. Daniel Michalow, the then Managing Director of DE Shaw, was forced to step down after allegations of being sexually inappropriate to women emerged. The firm has ever-since strived to stay on track given the possibility that the corporate leader could go on to made decisions that might hurt the operations of the firm.
The internal culture of the home of David Shaw involves keeping private things private. That reveals that the firm is never willing to disclose any information even if it is about hedge fund misbehavior. Nevertheless, DE Shaw has made strides in moving on after the Michalow situation threatened to bring it down. The firm has been making various efforts to address the situation and secure its future.
DE Shaw’s most recent move was having their employees sign non-compete agreements by 15th September. According to verified internal sources, the employees who did not want to sign the agreements would face employment termination. However, they were allowed to keep the compensation that they are usually required to forfeit. The firm has managers with over $50 billion under management. DE Shaw is one of the few firms that use computer algorithms to trade. In an effort to explain their actions, DE Shaw stated that it looked to align itself with the industry practice.
What catches the eye, though, is that the deadline for compliance with the agreements collided with the expiry date of Michalow’s contract which stipulates non-interference. The firm distanced itself from the claims that the collision of dates was not coincidental. Nevertheless, some people have found that hard to believe because it is rare for a large hedge fund to allow that to happen without a reason. Additionally, there are claims that the move was made to bar Michalow from poaching the firm’s investment talent to start their own.
Imagine leaving a fat check for a medium-sized one. That seems unrealistic given that DE Shaw offers more or has the potential to offer a larger size check with time. Clearly, DE Shaw has not put their art together and forge a clear way forward. That is backed by the fact that its leadership committee is making desperate decisions including asking for a pledge of loyalty from MDS recently.