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Morning Coffee – Why is Deutsche shortening its notice period? The Goldman partners who might be set up for a disappointment

Apocryphally, when one European diplomat in the Napoleonic era heard of the death of another, he responded by saying “I wonder what they meant by that?”. On hearing that some Deutsche Bank traders have had their gardening leave periods shortened from three months to one, people on Wall Street are likely to have had a similar response. 

Certainly, the official response that “In common with many peer institutions, we do on occasion flex leaving dates in line with our established policies and procedures” doesn’t make it any clearer why the flex has been flexed at this particular time. There’s two possible explanations that strike the mind.

The nasty possibility is that Deutsche might be trying to address a problem that’s affecting banks up and down the Street – the sudden and rapid decline of staff turnover, as employees get risk-averse in the face of seemingly worsening conditions. When people aren’t leaving in the ordinary course of business, it’s much harder to manage staff numbers downward without redundancies, if that’s what you’re planning. 

And the gardening leave requirement in bankers’ contracts is there to put some sand in the wheels of the labour market, by making it more difficult to move job. If Deutsche bosses are thinking about reducing headcount rather than growing it, adjusting the notice period is a cheap and easy way to rebalance things the other way, hopefully getting a little more natural churn and consequently saving a few potential compulsory redundancies down the line.

But there’s a “nicer” possibility too. Which is just that the “established policies and procedures” of every bank on the Street often allow for a bit more generosity toward people who are leaving for jobs at big clients. It makes sense to be accommodating to ensure that the employee still feels good about their former firm. And if someone is not going to a competitor, there’s not much point to the gardening leave requirement in any case. 

Since more or less the only people hiring senior traders right now are the big pod shops, it’s quite likely that Deutsche has just decided, in a number of cases, it’s good business to let them go. After all, if someone stays for the full three months, then that’s a few hundred thousand dollars on the cost line. But if they go to Citadel or Millennium and start making their former colleagues a first call, they might spend those three months making the same contribution to the revenue line.

Of the two possibilities, the nice one seems more likely.  Deutsche doesn’t seem to be announcing this as a general policy change, and there have been at least some recent departures to hedge funds. If this catches on as a general trend, the new status symbol for top macro traders might be a messy garden.

Elsewhere, there is apparently going to be some changes to the structure of the Goldman Sachs management committee.  Some change was bound to come – so far this year three of its members, including Julian Salisbury have left the firm and another three are retiring at the end of December, which is quite a material proportion of a committee that only has 30 members at present.

But it seems that David Solomon might be considering some more significant overhaul, potentially expanding the committee.  The idea here would be to recognise that thirty people is just the wrong size – it’s too big to exercise any real management control, but possibly not big enough to perform a role as a representative sounding board and think tank for the business as a whole.

And this might be a source of further problems. Since it’s the most prestigious committee at Goldman, and since Goldman partners are by and large very ambitious people with a deservedly high opinion of themselves, lots of people want to be on it. According to “people familiar with the situation”, quite a lot of partners have been lobbying John Waldron, and because he’s a nice guy he’s been telling them that they’re in with a chance. Many of those people familiar with the situation are a tiny bit worried that when it turns out that quite a lot of them don’t in fact have a chance, they’ll be disappointed. And of course, the last thing that David Solomon needs next year is a new class of disgruntled partners.


They all seem to be called Jonathan, a lot of them are competitive athletes and their trading books are so big that they’ve got the Federal Reserve worried.  A longread on the lucrative “Treasury basis trade” and the hedge fund managers who make it work.  Including some eyebrow raising stories of sharp elbows, like the time Jonathan Hoffman of ExodusPoint sued Lehman Brothers for $83m of deferred compensation that had already been bought out by his next employer. (Bloomberg)

One for the nostalgia buffs – Steve Epstein of Fried Frank reminisces about what it was really like to work in Frank Quattrone’s legendary tech investment banking group at Credit Suisse. (The Deal)

“It’s important to remember we are 36, and even though it doesn’t feel this way today, we are just getting started—and this too will be an unfortunate blip on a very long-term chart of our returns” is an all time great excuse for an investor letter.  The partners of Spruce House investment management, who raised money for a value investing fund and then went wild on growth stocks, have promised that their future strategy will involve a lot less FOMO and a bit more FOFU (WSJ)

Post-pandemic, employees are being “sick-shamed” for coming into work and coughing all over their colleagues.  This has led to some of them overusing cold medicines, rather than using the remote working policy. (Bloomberg)

There are still people apparently getting $300k jobs as “AI prompt engineers” (NY Post)

Family offices often pay well, and they’re still a fast growing sector, but they have some workplace stressors you don’t find everywhere else.  Denis Blank, a former partner at Hermitage Capital Management, got sacked by video call a week before his bonus day. (Bloomberg)

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AUTHORDaniel Davies Insider Comment
  • Th
    23 December 2023

    Heard on BI the Scottish devil aka Matt McClure was on a shortlist for the GS MC what. a. JOKE. If you’re going to give credit to GS industrials being the only industry group not to cave to JPM that title belongs to one and only one person Chris Gallea. No one respects Matt apart from his control over his underlings (read: slaves) bonus payment and in that respect he should and is feared. Don’t mistake that for respect Matt

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