Morning Coffee: Christmas is cancelled at Deutsche Bank. The worst “bad day at the office” ever for an equity trader
Times change. Once upon a time (2001, in fact), Deutsche Bank was able to book stars like Robbie Williams for its staff Christmas party, with a Spice Girl turning up too just because it was such a great party. Now, according to the FT, Christian Sewing has even cancelled the daytime coffee-and-cake Christmas reception for retired employees.
Today’s young bankers, of course, might consider a room full of people with defined benefit pensions to be a greater display of extravagance and opulence than any pop star private concert. And in the case of some members of Deutsche’s past pension schemes, they might be right. But it’s hard to imagine that the cost of a Christmas party for the oldsters is going to make a measurable difference to the rounding errors on Mr Sewing’s cost reduction targets; when top management teams do things like this, it’s because they want to send out a message.
When the big nightclub bashes were cancelled in the immediate aftermath of the financial crisis, it wasn’t difficult to understand what that message was. Staff were being reminded that bankers were newly highly unpopular, that conspicuous consumption was a bad look during a time when people were losing their jobs by the thousand and that it was time for a bit of humility. Christian Sewing has had to remind some of the sharper-dressed bankers at Deutsche that this is still something to remember. But picking on the pensioners is hardly calculated to appease populist sentiment.
To an extent, ostentatiously penny-pinching gestures like this are often aimed at the shareholders. The famous Ace Greenberg paper-clip memo, for example, was explicitly meant to create an image of a company with a strong focus on cost control; the idea being that if the CEO is prepared to look like a real tightwad when it comes to trivia, the big cost items will look after themselves. Deutsche Bank needs to convince the market that after half a dozen failed efficiency drives, this is the one that is going to deliver the goods, and playing Scrooge with the pensioners is an efficient way to signal how serious they are.
But it’s also sending a message out to the staff. The first people to criticise the cancellation of the pensioners’ party as “embarrassing and petty” were the German unions. And they may be the intended audience. After all, the key to keeping Deutsche’s cost cuts on track has to be that nobody is safe. And that might include members of trade unions, people on German employment contracts and all the other employees who are usually one step out of the firing line because getting rid of them is politically difficult or unpopular. At the top level, CEO careers are often defined by who you choose to pick a fight with, and by cancelling the Christmas party, Christian Sewing is not just making a break with the past, he’s signalling that he still doesn’t care who he upsets.
Elsewhere, can you imagine a worse day than that experienced by Adam Bailie, a senior trader at ADM Investor Services on 5 February 2018? It’s faded from memory now, but that day was pretty lousy for equities traders in general; it was the biggest one-day fall in six years and at the time, the largest points fall on record. Not only that, but ADM had several clients who were heavily leveraged. Not only that, but apparently the London risk management systems were not up to the task of telling Mr Bailie what margin calls he needed to make, and he had to make the calculations manually after getting information from head office in Chicago. Not only that, but he had to come into the office at 2am to make urgent “damage limitation” trades, as by the open the next day, several of the clients were insolvent and the company was looking at losses as big as $10m. And this happened a few weeks after Mr Bailie had been diagnosed with clinical depression.
This is all, as you might guess, from an employment tribunal case, in which he’s suing the company (which denies that his problems were caused by workplace stress, and in particular denies that he was later discriminated against and so should be entitled to unlimited compensation). Like so many people whose stories end up in the employment courts, Mr Bailie is in a bad way; the news reports suggest his health has been effectively destroyed. The stock market can be a cruel place.
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