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Bill Gross Takes A Big Shot At Pimco But It's A Long One
This really strikes home for me. I was at a small startup that never had a shareholder meeting or board election since the day it incorporated. After several years of this, a majority of shareholders (in both numbers of bodies and more importantly, shares) removed and replaced the board. The company CEO then asserted he'd been constructively terminated and made all sorts of pronouncements.
I'm hesitant to post more. Suffice to say, and with thanks to Yogi, it's déjà vu all over again.
IMHO the article is correct. Generally (in the absence of an employment contract to the contrary) a company is free to fire an employee for anything except what legislatures and courts have deemed against public policy ("bad reasons") - like your race or religion. California is likely the best place in the US to work as an employee, as it gives employees great protection.
So it will be interesting to see if Gross can make his argument that firing was to avoid a bonus payment fly. It would seem he needs to show that this money really was a substantial reason for his termination, and that (in California) this would constitute a "bad reason".
There were many, many reasons for the severance of Gundlach from TCW Galileo, including fundamental differences of opinion re. future direction of the entire company. Nevertheless, isn't it curious how often blow-ups "just happen" to coincide with special payments/unusually large bonuses due to the party, or parties, being separated? And, even though the company will claim it is all about the larger issues of disruption, the "philosophical disagreements," and not about the money (how could you even suggest such trivial matters are in play? we're a sophisticated firm, with an unimpeachable professional reputation), when the matter goes legal out come all those scraps of paper from the HR file, notes of incidents from long ago of rumors of staff affairs gone sour, tawdry "inappropriate remarks" made to clients/higher-ups, things "found" in e-mails and desks, the use of office stationery and equipment for personal business, etc.
Note the first order of business dispensed in the Gundlach matter concerned contractual pay: decision came down Gundlach $67M, TCW $0. Would it surprise me if someone, who just couldn't stop micro-managing (Gross) and was very much aware of everyone's salary and bonus rewards and allocation moves of every single fund in the stable, would not also be intimately aware of his own pay and incentives? Yes, why would it not? So, whether or not his firing was legally justifiable, this is a big tap on the shoulder to PIMCO, saying, "I think I am still owed, big-time; I shall not be going quietly into the night."
The decision was actually closer to Gundlach $67M, TCW $433M.
Gundlach had made a claim for $500M based on a personal oral five year service contract. (I'm wondering how his lawyers argued that the statute of frauds, that requires contracts to be in writing for any service that must take more than a year, did not apply.)
In any case, the court awarded Gundlach back wages, which is what one would expect in most jurisdictions, and certainly in employee-friendly California. It did not award him any bonuses under an unsigned, unenforceable agreement. Here's TCW's one page letter, along with a Bloomberg summary: http://www.cfrs-ca.org/Events/Documents/Inv/11Sept27_Inv/C6.pdf
In contrast, Gross seems to be relying upon a generic company agreement, not one personal to him. That agreement says explicitly that if you're not around until the end of the period to get your bonus, you lose. Gross' argument is that, well, the company has been generous to others (giving them bonuses even when they left early), so it has a legal obligation to give him a gift also. The Gundlach court didn't seem to think that bonuses/performance fees are part of wages that are protected by state law.
Gundlach had nothing in writing. The article cited in the original post said pretty much the same thing about Gross - he'll lose also if he can't show something more in writing.
Poor destitute Mr. Gross. My reaction is that this has more to do with his bruised ego than any dollar issues. Anything to get publicity and attention on him again. Janus has had enough problems over the years. Now they have Mr. Gross.
Janus has had enough problems over the years. Now they have Mr. Gross.
I'm not planning on transferring any money to either of these two firms. But it does make one wonder how other large financial instutions - especially in the mutual fund arena - deal with these types of personality issues? Can't imagine anything getting near this ugly at TRP or D&C for instance.
Comments
I'm hesitant to post more. Suffice to say, and with thanks to Yogi, it's déjà vu all over again.
IMHO the article is correct. Generally (in the absence of an employment contract to the contrary) a company is free to fire an employee for anything except what legislatures and courts have deemed against public policy ("bad reasons") - like your race or religion. California is likely the best place in the US to work as an employee, as it gives employees great protection.
So it will be interesting to see if Gross can make his argument that firing was to avoid a bonus payment fly. It would seem he needs to show that this money really was a substantial reason for his termination, and that (in California) this would constitute a "bad reason".
Note the first order of business dispensed in the Gundlach matter concerned contractual pay: decision came down Gundlach $67M, TCW $0.
Gundlach had made a claim for $500M based on a personal oral five year service contract. (I'm wondering how his lawyers argued that the statute of frauds, that requires contracts to be in writing for any service that must take more than a year, did not apply.)
In any case, the court awarded Gundlach back wages, which is what one would expect in most jurisdictions, and certainly in employee-friendly California. It did not award him any bonuses under an unsigned, unenforceable agreement. Here's TCW's one page letter, along with a Bloomberg summary:
http://www.cfrs-ca.org/Events/Documents/Inv/11Sept27_Inv/C6.pdf
In contrast, Gross seems to be relying upon a generic company agreement, not one personal to him. That agreement says explicitly that if you're not around until the end of the period to get your bonus, you lose. Gross' argument is that, well, the company has been generous to others (giving them bonuses even when they left early), so it has a legal obligation to give him a gift also. The Gundlach court didn't seem to think that bonuses/performance fees are part of wages that are protected by state law.
Gundlach had nothing in writing. The article cited in the original post said pretty much the same thing about Gross - he'll lose also if he can't show something more in writing.
I'm not planning on transferring any money to either of these two firms. But it does make one wonder how other large financial instutions - especially in the mutual fund arena - deal with these types of personality issues? Can't imagine anything getting near this ugly at TRP or D&C for instance.