Morning Coffee: Kind colleagues quadrupled banker’s bonus to $50k, yet he still complained. One of the best compensation schemes in the world is under threat

It’s surprisingly difficult to think back to the pandemic, even though it’s more recent than, for example, “Avengers: Endgame” or David Solomon taking over at Goldman Sachs. Most of us have moved on, thinking about it, if at all, as the reason why we have to take Zoom calls on holiday but are able still to work from home on Mondays.

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Some unfortunate souls, however, are still dealing with the long term health consequences of COVID-19. Matthew Colliander-Smith, until recently a risk manager and partner at Veritas Asset Management in London, is one example – over the course of 2022, he was suffering from such severe long COVID symptoms that he was only able to work 18 days.

Obviously, someone in that position deserves all of our sympathy.  But do they also deserve a bonus?  The other partners at Veritas decided to give Mr Colliander-Smith a token £10k ($13k).  And that’s when the trouble started, and didn’t stop until it reached an employment court.

Colliander-Smith made the case that he had really tried his utmost – the 18 days of work were made up of short bursts of replying to emails across most of the year – and that the amount of effort it had cost him to continue working at all should be taken into account.  One of his friends tried to make a case to the firm’s remuneration committees that £97k ($128k) would be a fairer award, and would mean less of a precipitous drop in his family income.

This did not fall on completely deaf ears at the remuneration committee.  But after consideration, the company decided it didn't want to increase the award because doing so would be unfair to other employees who hadn't received a bonus.  Some of Colliander-Smith’s colleagues very kindly then offered to reduce their own bonuses so that they could split the difference somewhat, leaving him with £40k ($52k).

From there on, it gets complicated and almost impossible to summarise in a way that’s fair to both sides. When someone has a long term chronic illness, it can be quite frustrating to colleagues that their health tends to ebb and flow, making it difficult for them to commit to return dates and responsibilities.  And the measures that companies take to cover for an absent employee can often look like they’re pushing the sick person out.  After a bit of this sort of activity, Colliander-Smith decided retrospectively that he wasn’t as happy with the £40k as he thought he’d been, and that he had been discriminated against on grounds of disability.  He didn’t help himself by returning to work, and then immediately taking two weeks off with his family without asking for permission.

You have to feel sorry for someone who has had such bad luck with the virus.  But Mr Colliander-Smith lost all of his claims, as the court found that bad luck is just that; the company wasn’t obliged to pay bonuses for no work.  And it seems unlikely that his recovery has been helped by the decision to lawyer up; at one point the tribunal had to be stopped because he was so ill he couldn’t stand the fluorescent lights.  As we often say, it’s extremely rare for anyone to leave an employment court feeling like a winner.

Elsewhere, Macquarie has gained the nickname “The Millionaire Factory” because of its extremely generous top management compensation scheme.  The Australian bank has shared out a generous proportion of the profits on its investment banking and infrastructure finance deals, and because those have been very lucrative, the top bankers have done well.  It’s how incentives are meant to work in investment banking; a win-win situation.

Except that the wins haven’t been quite as reliable in recent years, while some past wins appear to have generated long-term regulatory and compliance legacy costs.  And now, a very tough corporate governance rule might kick in – if there are two “strikes” in the form of nonbinding resolutions against the remuneration proposal in consecutive years, this triggers a “spill” in which the whole board has to stand for re-election.

It seems unlikely that shareholders will really vote to demolish the model on which Macquarie is based – they can hardly claim not to have known that it was a big paying investment bank.  But the millionaire factory might be on go-slow for a while.

Meanwhile …

US super-boutiques have been making so much money in their domestic franchises that they’re able to spend it on expansion elsewhere.  So far this has led to a hiring race in Paris, but now it seems that it’s affecting London too.  Evercore has paid $196m to acquire Robey Warshaw. (Financial News)

Sarah Patel, the COO of Scotiabank’s capital markets division, is leaving the industry for personal reasons. (Bloomberg)

The average salary of a nanny in London is now more than £50k ($65k), putting the prestige form of childcare out of the budgets of all but top ranking bankers.  However, this doesn’t necessarily mean we’re in the wrong job – industry specialists say that there are many fewer “high end” childcare jobs earning multiples of the average. (FT)

Alison Harding-Jones has started reorganising at Deutsche and it seems to have a European aspect. Mark Lewellen has been promoted from co-head of EMEA capital markets to global co-head of DCM, while Ade Ademakinwa has gone from head of EMEA debt syndicate to global head. (Global Capital)

Crypto bros appear determined to learn all the lessons of traditional finance from first principles; the latest such lesson is “people who partner with Donald Trump often end up with serious buyer’s remorse, and you are unlikely to be the exception to this rule”. (WIRED)

Backgammon is a game that tends to have waves of popularity – people start playing it when they realise it’s more fun than poker, then stop when they realise that derivatives quants are often massive sharks who will take all your money.  Currently, it’s having a moment in New York. (FT)

Blackstone regularly holds active-shooter trainings for employees. Blackstone employees got two automated messages in quick succession—the first said to evacuate the building and a second said to shelter in place and wait for the police to come. (WSJ) 

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