Morning Coffee: The $10m banker who’s cheap at twice the price. Sanctimony of once-jailed hedge fund manager
Apocryphally, the great Hollywood producer Sam Goldwyn once said of a director that “we’re overpaying him, but he’s worth it”. No doubt, this quotation has been heard at many investment bank compensation committee meetings, to describe the kind of banker that demands – and gets – an extension to the usual envelope of pay and bonus norms, but sometimes it might be justified.
One of those times might involve Andrea Orcel and Unicredit. Having foregone Orcel as their own CEO on the basis of his pay demands, shareholders of Santander might today be looking at the performance of Unicredit and reflecting that the pay package that their own board decided was deal-breakingly excessive for Andrea Orcel might have been the most expensive money they ever saved. While Santander's shares have more or less kept pace with the sector and the Spanish bank overall declared a disappointing first quarter for 2023, Unicredit's stock has more than doubled over the last twelve months, and its latest set of results were the best in a decade.
How much of this is attributable to the current management and how much to luck? It’s true to say that the rising interest rate environment is good for a bank like Unicredit. On the other hand, the macro weather is the same for everyone; what matters is your ability to take advantage of it. And Orcel’s particular management style might be very well adapted to current conditions. He’s famous for a rather intense work ethic, and from his arrival two years ago he’s been taking out layers of management, removing co-head structures and generally trying to make Unicredit into a more agile organisation with less overhead and faster decision-making. That’s not necessarily the way to make friends in a “Continental European culture”, but it seems to get results.
Consequently, when next year’s remuneration vote comes round, Mr Orcel might expect to hear a bit less quibbling from the corporate governance types. In fact, given that there’s always an active market for CEOs who can deliver, he might get a bit closer to the rumoured “stretch goal” of a comparable pay package to the best of Wall Street. In a year when stand-out performance for the banking industry might simply consist of not having a deposit run, keeping out of court and passing the stress tests, people might reason that it makes sense to pay up for quality.
For Orcel-watchers, the lesson to learn here is pretty clear; know your own value and don’t be scared to ask to be rewarded properly for making stretch targets. A more subtle takeaway, though, might be that if you ever find yourself working with one of the industry’s superstars, stick with them. Although it’s been Mr Orcel’s remuneration that’s made all the headlines, it is likely that the core team of long-term colleagues in his “office of the CEO” will be have been well looked after. At the very least, whatever they got in stock awards last year, they’ve got twice as much now.
Elsewhere, although catastrophic failure is usually not to be recommended as a career move or a financial strategy, it can be surprisingly good for someone’s personality and ethics. Not so long ago, Dan Kamensky had a pretty bad reputation for unpleasant and aggressive behaviour, even by the standards of distressed debt investing. Then he tried to do the tough-guy act with a former Navy SEAL on Jefferies’ trading desk. One thing led to another, it all got rather unpleasant and to cut a long story short, he’s out of jail now.
Having used the time inside to reflect on the error of judgement that put him in there and led to the collapse of his former hedge fund, Marble Ridge, Kamensky has now reinvented himself as the conscience of the industry. As founder of the Creditor Rights Coalition, he’s presenting at conferences and publishing a newsletter, speaking out against abuses of bankruptcy law by distressed debt hedge funds.
Normally, this sort of thing gets people’s backs up – it’s never particularly welcome for those of us who managed to stay out of prison to get a lecture on morality from someone who didn’t. However, there seems to be a significant feeling of “there but for the grace of God” among the distressed debt community, who have a lot of respect for Kamensky’s knowledge and analysis, and who still seem to regard him as one of their own.
Meanwhile …
Do you want a Pierpoint & Co hoodie like the kids in “Industry”? An Axe Capital vest like in “Billions”? What do you mean, “no”? Both these garments, plus a ton of Wayster Royco swag from “Succession” are available for purchase, for considerably less than a pair of box fresh Deutsche Bank Adidas Stan Smiths. (GQ)
Bigtech firms are learning a lesson that’s known to every headhunter on the Street – during a period when everyone’s nervous about layoffs, it’s easier to poach good employees. Nobody is quite so secure in their position that they won’t pick up the phone when there are rumours of staff cuts, and once the conversation has started, it’s started. (Business Insider)
An 18-year veteran banker in Citi’s private capital group has left the bank, after an investigation was started last week into allegations that he’d met with Jeffrey Epstein after JPMorgan terminated him as a client. (FT)
It’s hard to interpret what this means in terms of personnel ambitions because working practices have changed, and its existing building isn’t at full capacity, but Nomura is planning to exercise the break clause in the lease on its US headquarters, and is looking for a new location with substantially less floor space. (Bloomberg)
Your job changes your brain structure, whether it’s taxi drivers getting better spatial awareness, restaurant workers developing the ability to memorize tickets, or bankers getting really good at shouting on the phone. (BPS Research Digest)
The big deals will come back, Goldman Sachs always does better in transactions above $10bn, and consequently not only will revenue be up in H2, but Goldman will top all the league tables. A “person with knowledge of the thinking” of Stephen Feldgoise, co-head of M&A at GS, certainly demonstrates that only true optimists reach the highest ranks in that business. (Business Insider)
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