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In a record-setting order last week, a FINRA arbitration panel issued a $52 million defamation award to Dan Michalow – the former co-head of global hedge fund D.E. Shaw’s Macro Group who had been fired in 2018. D.E. Shaw said publicly at the time that the termination was prompted by a complaint that alleged “abusive and offensive conduct.” Here’s more info from one of the firms that represented Mr. Michalow in the binding proceedings:

The FINRA panel explicitly found that D.E. Shaw had defamed Michalow and that Michalow did not commit sexual misconduct. D.E. Shaw and four members of its executive committee were found jointly and severally liable.

According to FINRA databases, the damage award is the sixth-largest overall award handed down to an employee by FINRA, the largest ever awarded by FINRA for defamation, and the largest ever to an individual employee.

According to this Investment News write-up, Mr. Michalow issued a statement in connection with the order that says he believes he was a scapegoat to deflect scrutiny of the firm’s broader culture.

This outcome shows that there’s often no cut & dry way to respond to complaints like the one that started this whole mess. It may be appropriate to take swift action and make public statements that stand against alleged wrongdoing – yet it’s also important to avoid making pointed statements against individuals before they’re proven true. Even better, avoid the issue in the first place by monitoring & addressing cultural issues before they lead to a complaint. Last fall, D.E. Shaw appointed Maja Hazell, the former Global Head of Diversity & Inclusion at White & Case, as a Managing Director and first-ever Head of DEI.

Our checklist on “Board Risk Oversight – Sexual Harassment Policies” outlines steps to navigate these issues. On PracticalESG.com, we’re adding resources every day that provide practical guidance on enhancing Diversity, Equity & Inclusion programs. DEI effort & progress is essential in today’s environment where employees are empowered to publicly air grievances and the public is ready to pile on – and DEI officers need to be supported with adequate resources in order to solve the problems they’re hired to address. We have over a dozen subject area pages with curated, practical guidance on navigating diversity topics, on-demand replays of our 3-part event on DEI data and civil rights audits, DEI checklists on 20 key topics (and growing), and more.

If you aren’t a member with access to these resources, sign up online, email sales@ccrcorp.com, or call 1-800-737-1271. Our “100-Day Promise” makes this a “no-risk” situation: during the first 100 days as an activated member, you may cancel for any reason and receive a full refund!

– Liz Dunshee