83,057
edits
Employment derivatives: Difference between revisions
Jump to navigation
Jump to search
no edit summary
Amwelladmin (talk | contribs) No edit summary |
Amwelladmin (talk | contribs) No edit summary Tags: Mobile edit Mobile web edit Advanced mobile edit |
||
| Line 48: | Line 48: | ||
The market needed an observable, objective measure of “prevailing startup insanity”, which Barkley denoted “''π”''. He had just the means to achieve it. Under the auspices of the British Human Capital Managers’ Association (BHCMA), he arranged for a committee of fashionable startups to meet each afternoon in a WeWork in Shoreditch and over kombucha martinis to state publicly, in front of a live panel of [[venture capitalist]]<nowiki/>s, how much they would be prepared to pay an underperforming settlements and reconciliations clerk to join them and drive customer engagement. They expressed this as a premium of discount to ''π''', being the equivalent value for the preceding day. | The market needed an observable, objective measure of “prevailing startup insanity”, which Barkley denoted “''π”''. He had just the means to achieve it. Under the auspices of the British Human Capital Managers’ Association (BHCMA), he arranged for a committee of fashionable startups to meet each afternoon in a WeWork in Shoreditch and over kombucha martinis to state publicly, in front of a live panel of [[venture capitalist]]<nowiki/>s, how much they would be prepared to pay an underperforming settlements and reconciliations clerk to join them and drive customer engagement. They expressed this as a premium of discount to ''π''', being the equivalent value for the preceding day. | ||
The BHCMA would trim the top and bottom estimates, average the remainder and compile and publish the trimmed arithmetic mean rate as the [[London Inter-Employer Basic Offered Rate]] ([[LIEBOR|PIEBOR]]). PIEBOR quickly became the ''de facto'' measure of ''π'' and was soon factored into the “floating” leg of [[employment rate swap]] | The BHCMA would trim the top and bottom estimates, average the remainder and compile and publish the trimmed arithmetic mean rate as the [[London Inter-Employer Basic Offered Rate]] ([[LIEBOR|PIEBOR]]). PIEBOR quickly became the ''de facto'' measure of ''π'' and was soon factored into the “floating” leg of [[employment rate swap]]s as standard. | ||
==== Credibility spread ==== | ==== Credibility spread ==== | ||
| Line 56: | Line 56: | ||
Meantime, the need for periodic [[Reduction in force|reductions in force]] was greatly reduced and could be handled quantitatively without reference to individual performance or value — as that was baked into the portfolio credibility rating. This led to the curious phenomenon of staff with the ''highest'' credibility ratings — ergo those who were, “pound for pound”, most expensive — being the first to go. | Meantime, the need for periodic [[Reduction in force|reductions in force]] was greatly reduced and could be handled quantitatively without reference to individual performance or value — as that was baked into the portfolio credibility rating. This led to the curious phenomenon of staff with the ''highest'' credibility ratings — ergo those who were, “pound for pound”, most expensive — being the first to go. | ||
====Expansion==== | ====Expansion==== | ||
By this financial engineering Barkley had unwittingly created a tradable instrument out of an abstract benchmark. Due to the offsetting nature of ERS transactions one needed to be neither long nor short actual staff but could trade directionally on abstract [[π]] without having a job, or any workers, at all. These “synthetic” instruments were valuable for sectors affected by the vagaries of the labour market even where not themselves directly exposed to it. Recruitment consultants, employment lawyers, HR Consultants — that kind of thing. | |||
Individual workers began to buy π-linked [[contracts for difference]] as a way of laying off their own intrinsic [[loyalty discount]], a sort of negative carry that comes from unreflective devotion to a single monolithic corporation. This restricted the need to quit to a narrow run of unmanageable idiosyncrasies such as cultural fit, business relocation and visceral hatred of the boss. | |||
Before long more exotic ERS payoffs emerged. Capital protected [[Reduction in force|RIF puts]], employment collars, diversity forwards and synthetic collateralised gender pay gap swaps. All these risks, and more, could be managed in the hypothetical with out adjusting the physical staff roster at all. | |||
Banks even began selling employment derivatives directly to their employees, saving the bother of having to hedge themselves. | |||
So began the sad chronicle of employment rate swap mis-selling. In this dark episode, banks would separate the employee’s fixed rate, and pay that under a physical employment contract, then separately hedge out their π risk with a linked derivative. Before the emergence of ERS, the π risk was intrinsic to the employment contract and could not be abstracted and traded separately. | |||
The scandal blew up when it emerged HR departments were being offered incentives to place employee counterparties on performance management, arranging with other firms to bid them away or just peremptorily layingthe employee off, leaving her holding a twenty-five year out of the money employment rate swap and badly exposed should crypto go tits up. | |||
Such “self-referencing employment derivatives” are now not permitted in many jurisdictions, and attract penalty risk weighing in the UK. | |||
{{Sa}} | {{Sa}} | ||