DE Shaw: In the Aftermath of Daniel Michalow’s Exit

Daniel Michalow was accused of being sexually inappropriate with his female colleagues and as a result, lost his executive job at DE Shaw. He deployed ineffective strategies to defend himself that didn’t bear any fruits. The situation escalated quickly to show the internal of Shaw’s home. The hedge fund seemed averse to speaking to outsiders and they even ended up seeming to cover up hedge fund misbehavior.

“DESCO” is still recuperating from the Michalow predicament which tainted its future. A clumsy approach has been taken to address the issue, at least according to per the FT. DE Shaw employees have been tasked to sigh non-compete terms or non-closure terms. The employees who decided not to sign the agreement were threatened to be fired. However, they were allowed to pocket the deferred compensation.

DE Shaw manages more than $50 billion making it one of the largest hedge funds in the market that use computer algorithms. According to managers at DE Shaw, they had to make the employees to sign the agreements to comply with the industry practice. What has attracted attention, however, is that the date the agreements becomes effective is the same day when Daniel Michalow became legally capable of hiring DE Shaw employees or even partner with them and found another hedge fund. The restrictions on interference in his employment contract lasts 18 months which elapsed on 15th September.

While the firm claims that the dates were purely coincidental, the argument that they were barring Michalow from poaching their employees makes sense. Additionally, the firm would have gone to any extent to prevent such conclusions from being made by assigning the deadline to another day. The firm was serious about the barn on its employees. It is also not clear how staff will forego a large-sized check for a medium-sized check. It is easy to stick around and even earn more.

The firm’s leadership committee has revealed that things are getting late-stage at its headquarters and the whole lot might suffer in the long run no matter who stays or leaves. What is clear, though, is that the temperatures in the firm have gone up and a lot is going on in the firm.