82,891
edits
Co-head: Difference between revisions
no edit summary
Amwelladmin (talk | contribs) No edit summary |
Amwelladmin (talk | contribs) No edit summary |
||
| Line 14: | Line 14: | ||
The greatest, most glaring example of this is at our old friends Credit Suisse, who found to their cost what [[Archegos|happens when you have co-heads of prime services]]. For those without the stomach for a deep foray into [[hedge fund]] financing, you need know only this: prime brokerage generally splits into ''physical'' and ''synthetic'' components which are formally6 quite different but substantively the same; Europe and New York are major centres for prime services businesses. Now at the time a certain hedge fund blew up, trading ''synthetic'' products in the Americas causing Credit Suisse roughly $5billion in losses, the firm had co-heads of that business, one in the US and one in Europe. These men were duly summoned before the executive board to explain themselves. The one based in America explained that ''he'' was responsible only for ''physical'' prime services, so this was not on his patch. The one based in London said ''he'' was only responsible for ''European'' prime brokerage, so it wasn’t on ''his'' patch, either. | The greatest, most glaring example of this is at our old friends Credit Suisse, who found to their cost what [[Archegos|happens when you have co-heads of prime services]]. For those without the stomach for a deep foray into [[hedge fund]] financing, you need know only this: prime brokerage generally splits into ''physical'' and ''synthetic'' components which are formally6 quite different but substantively the same; Europe and New York are major centres for prime services businesses. Now at the time a certain hedge fund blew up, trading ''synthetic'' products in the Americas causing Credit Suisse roughly $5billion in losses, the firm had co-heads of that business, one in the US and one in Europe. These men were duly summoned before the executive board to explain themselves. The one based in America explained that ''he'' was responsible only for ''physical'' prime services, so this was not on his patch. The one based in London said ''he'' was only responsible for ''European'' prime brokerage, so it wasn’t on ''his'' patch, either. | ||
===All credit, no responsibility=== | |||
It will be a different story should the business be in rude health, of course. There are few banking executives who won’t claim credit for every iota of positive return, and it will be a rare bank which pays each of its co-heads exactly half what it would pay a single head. | |||
But it should do: the only way a co-head arrangement could work is one that few investment bankers would entertain for a moment: that of [[partnership]]: [[joint and several liability]], and therefore individual responsibility for the totality of any loss, and proportional sharing of any profit. This is, of course, to increase one’s vulnerability to one’s comrades in the service of the firm’s interests, and is not how the professional managerial class like to go about things. | |||
===Rationale=== | ===Rationale=== | ||