Shortly after the death of an overworked Bank of America intern in London in 2013, a then M&A analyst at a big investment bank recalls that he had an encounter on leaving his Canary Wharf tower at 11pm.
“I smell capacity,” he was told by a more senior banker — that is, free time that could be spent working.
He never reported the incident for fear of reprisals. A few years later, burnt out from bouts of working 15 hours a day and seven days a week, he quit. He brought up the incident in his exit interview as a reason he would never return.
Seven years on from the death of 21-year-old Moritz Erhardt, investment banks find themselves once again defending the hours they demand from young workers, after exhausted Goldman Sachs analysts circulated a slide deck detailing brutal 95-hour weeks and workplace abuse, exacerbated by the isolation of homeworking during the pandemic.
Their protest has captured the spirit of the moment. A string of banks have since sent memos and published press releases committing to changing the way staff work. But will it be different this time?
Senior executives clearly feel pressure to do, or at least say, something. Goldman’s chief executive, David Solomon, came out in support of the dissident analysts, and pledged more humane hours. Jane Fraser, Citigroup chief, sent staff a memo calling for a “reset” of working life, including limits on video calls and flexible working arrangements after the pandemic passes.
Other banks are giving junior staff perks and pay bumps: Jefferies offered Peloton exercise bikes; Credit Suisse is paying junior bankers $20,000 bonuses. Several banks have said they are planning to hire more staff, to lighten the load on existing employees.
Sara Wechter, head of human resources at Citigroup, told the Financial Times that while “everything is overwhelming and hard right now,” the bank has been thinking about how to give its employees a better work-life balance since long before Fraser’s memo. She cited a company-wide day off initiated last year and to be repeated this year. “We have looked closely at hours worked, we wanted to make sure there were not pockets of people who were working too hard. It is something management is acutely sensitive to.”
Either way, a pattern of working that was taken for granted across the industry is now the subject of widespread debate. One early career analyst at Morgan Stanley said the Goldman presentation was “all his colleagues could talk about”, debating whether they should protest too, or accept that they had signed up for a well-paying but tough job.
“On the one hand, I signed up to be an investment banking analyst, I knew I was gonna work extremely hard, I knew that people would sometimes be rude. But on the other hand we are asking ourselves whether the reality has exceeded our expectations.”
One former Goldman banking analyst, who left after two years, said opinions among his friends were split. “The senior guys’ view is, shut up or quit. For guys raising young children while managing the workload, the mentality is ‘we’ve all been there’. The flip side is, being at home on your own is not conducive to mental health. The thing that made my time at Goldman enjoyable was the camaraderie.”
Many first-year analysts have never seen their colleagues or bosses other than on screen. “Every time I leave my screen to go for a walk or take a break I need to communicate it to my VP,” said an analyst at a boutique investment bank. “Everyone is constantly scared about being monitored . . . it’s a huge breach of our privacy.” Another analyst called the technological monitoring a “virtual leash”.
It has been a particularly busy year for dealmaking, and on top of that the boom in special purpose acquisition companies caught many banks by surprise. Spacs, which raise cash on the stock market and later hunt for a company to take public, are suddenly red-hot, with more than 500 launched over the past 12 months. “The Spac thing just took over our life,” said a young banker at a large investment bank.
The industry has changed, too. Back in 1994, Brian Mullen, then a managing director at boutique investment bank Donaldson, Lufkin & Jenrette, wrote a now-famous memo in response to complaints about staff being too busy. “Let’s define ‘busy.’ You are “busy” [if] you are working each weekday at least 16 hours and at least 16 hours on the weekend” he wrote. “If these are not your hours at the office, you have the capacity to take on more work.”
Now he takes a different view, writing that although he never regretted the message, “In the 1980s [and] ’90s, the investment banking industry was growing at a rate of 20 per cent per annum and margins were considerably higher . . . margins have fallen along with growth, and winning business is increasingly about the franchise rather than the individual.” Given the diminished opportunities the industry offered, asking too much would only alienate employees, he said.
One senior banker noted that other industries, such as technology and private equity, now offer graduates similar salaries but with a better lifestyle. “Investment banks cannot use the cudgel any more, can’t say ‘if you want to be paid, you have to suck it up’ — it’s not as sexy as an industry any more.”
Despite the shift in attitudes, many in the industry are cynical about the possibility of significant change. Standing in the way are peer pressure and entrenched middle management that have more influence on young bankers’ careers than well-intentioned executives.
“We are all nervous to say when we are struggling, we have occupational health programmes [but] if you go on to one, the bank can legally stop you coming into work, which we are terrified of having happen, cause it will halt our careers and let our colleagues know we can’t handle it,” said an executive director at a global bank. She calls the recent memos and press releases a “hilarious” repeat of the empty rhetoric of 2013.
The cynicism may be warranted. Deniz Okat and Ellapulli Vasudevan, two academics, have studied the effect of no-Saturday working policies instituted by investment banks following the death of Erhardt. They looked at data on millions of taxi rides between 10 investment bank headquarters in New York City and residential neighbourhoods, and found that while Saturday rides decreased, late-night taxi rides on other nights increased significantly. “The policy backfired by inducing bankers to work longer during non-protected days,” they concluded.
Changing incentives was the key, several bankers said. “Bankers and traders are motivated by money,” said one senior trader. “I have seen in the past some banks make discretionary bonuses of middle management based on grad retention, and this would seem to be the only way to force change.” She noted that it was the incentives for desk heads and other members of middle management, rather than for senior executives, that mattered.
Client incentives matter, too. Banks charge flat deal fees, rather than billing by the hour, making junior bankers’ work in effect free. “Bankers are seen as free limitless resources,” said a former banker who now works on the corporate side. “Everyone says: bankers don’t add any value so let’s just take advantage of them.”
Mel Newton, head of financial services workforce consulting at KPMG, thinks that working young bankers for very long hours is a poor strategy for maximising productivity. She acknowledged there was a “supply-demand imbalance” where plenty of young people were lining up to take analyst jobs, so there was a temptation to work them hard. But “are they actually that productive between seven and midnight? I would doubt it, and certainly after three or four days of that, they are likely not capable of doing good work.”
The solution, she argued, was “educating senior management about what actually drives productivity in their workplace: is it long hours, or happy employees? You are going to get much more out of a group of people who love working, love the organisation, and feel valued.” Clients are demanding, “but it is up to the banks to set those boundaries”.
The former banker who was chided for leaving work at 11pm recalled that “a huge amount of what I did can be done away with. The work was pointless . . . the best bankers are the ones that come in with two to three pages or no presentation at all because they know what they are talking about.”
Many of the bankers who spoke to the FT drew positives from their early years in the industry, however. The former Goldman analyst said: “The analysts that join a Goldman or an Evercore? They are all alphas. They have all done well in everything they have ever done. I didn’t want to work less. I wanted the responsibility. This scenario where you hire twice as many analysts and they work half as much? I wouldn’t want to work in that environment.”
Additional reporting by Owen Walker and Francesca Friday