On March 15, 2018, DE Shaw fired managing director Daniel Michalow after a sexist comment. After being accused of being inappropriate with a female employee, he responded that he’s a dick, not a perv. This situation caused a look into David Shaw’s home for poet quants. Their hedge fund is so secretive to outsiders they ended up guilty of covering up the hedge fund misbehavior.
More than a year later DESCO has settled and DE Shaw is aggressively addressing the situation. The company has new non-compete terms that all employees must sign by September 16th. Any employee that refused to sign will be terminated. The ones terminated will keep compensation that would normally be lost. With more than $50 billion being managed, they are one of the largest hedge funds that use computer algorithms for trades. DE Shaw insists that the non-compete terms is standard practice in the industry.
The new terms go into effect on September 16, 2019, which is the same day that Daniel Michalow’s 18-month no interference is over. Starting then, he can hire DE Shaw employees to start a new hedge fund. DE Shaw says it was a coincidence, but it’s strange, they would even allow people to think otherwise by having the dates overlap.
Daniel Michalow is sexist and couldn’t be kept there. If that’s true, why is DE Shaw making sure their talent can’t join with him? The company is very serious about its employees signing the new terms. DE Shaw is a top hedge fund that still pays, so it’s doubtful that most people would take a check and leave. DE Shaw says that DESCO HQ is complying with the new changes. This could piss off a few people who will take the check and leave.
An odd moment during a meeting with leadership was when they demanded a loyalty pledge. Some wondered why it was necessary. The worst-case scenario for DE Shaw is if many employees gets pissed and join up with Daniel Michalow. He could just be a dick. DESCO HQ said the investors would only panic if a former female employee joined him.