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Sustainability of extreme working hours
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Situation
Moritz Erhardt, a German summer intern at Bank of America Merrill Lynch died in his shower after 72 hours of consecutive work. He was an epileptic patient but the trigger of his seizure was (most probably) related with the long working hours. That such a thing happened was a matter of time. The working hours of interns and young graduates that want to prove themselves in investment banking or even banking in general is astonishing. The work-life balance of those fresh employees is non-existing. They perform brutal hours in order to be able to demonstrate themselves to get a full-time job or to be able to climb the ladder as fast as possible. They are merciless with their own bodies and do not know what the possible consequences are. The question concerning the long working hours was raised in court. “It depends on deadlines. Some of it is peer pressure. There is a general expectation in our profession.” said Juergen Schroeder an employee of the corporate finance department of Bank of America. “Being in the City is like being in a bubble. You throw yourself into it and forget about the rest of the world.” said a previous intern and now writer Polly Courtney. This demonstrates what the magic of the City does with people really wanting to obtain that unique position. Those long hours do not only lead to physical dysfunctions but also use of drugs and other related medicine, in order to be able to keep up with the work pace.

After this sad story, Bank of America tackled the issue. They widely spread the press that they will gather a “formal senior working group” to investigate what happened and to look at the overall workplace practices. This is a perfect example of handling issues post event. Since the problem is not new they should have discussed this earlier. Of course, we don’t have to blame the senior investment bankers at large, the interns play a big role as well in trying to demonstrate their eagerness to perform and do not disappoint their superiors. They are paid correspondingly but client requirements and their yearning to career advancement lead to a very harsh culture. It is a vicious circle that constantly renews itself. Young workers get to work hard and within a few years, when they climbed the ladder, they will do the same with the fresh graduates. All of this is seen as a baptism in the investment banking industry. One can compare this to a baptism in a student association. You are exploited and abused into a certain extent that the year after, when the freshmen come in, you are still deeply frustrated that you will abuse your power and do the same, or even worse to the new class of students. This creates the vicious circle, which has to be broken once.

Evaluation of morality and sustainability
The situation is sketched and we will have a look to some theories explaining the event that happened. If you look at the ethical leader’s decision tree we can pose ourselves some questions. With the first question “Is the proposed action legal?”, we do already have to ask ourselves if working one hundred or more hours a week is legal. According to me this is already illegal. But let’s assume this as redundant for the sake of evaluating the different questions. The next question to be asked is if it maximizes shareholder value. On this question I guess everyone can be unanimously positive. The more the interns and young graduates work the more value they will probably create for their superiors and in the long run for the clients. We will look into productivity issues in those long days in the next paragraph. Taking into account a positive answer on this question, which is doubtful, we have to evaluate if the action (“let young employees work inhumane hours”) is ethical. The effect is only negative for young employees. Since the competition to get those scarce jobs in investment banking is that tough the incentive to make life more enjoyable when setting the first steps in the investment banking world is low. However, there should be a debate on this if recruiting on this way recruits the best and smartest people yes or no. By recruiting two people instead of one the work is split up and the long working hours belong to history. The top management of the investment banks should consider this. Only they have the power to change the way things go at the moment.

Figure 1: Law of diminishing returns to labor
Figure 1: Law of diminishing returns to labor
Several articles review the productivity when working long hours. We can use the law of diminishing returns (see Figure 1) to prove this standpoint. When working, more and more hours are done by a specific person, one argues that their marginal return on those units of labour worked are decreasing and eventually, when we reach the maximum, they decrease. In a lot of academic literature productivity/efficiency is measured with amount of workers, however in this specific issue, it is about one worker and his total amount of hours spend per day/week/month/etc..
Figure 2: Sustainable value VS Unsustainable value
Figure 2: Sustainable value VS Unsustainable value

Besides being ethical, it has to be a sustainable action. The question to ask yourself is if it brings shareholder value and stakeholder value, each independent from each other. Without considering productivity issues it definitely brings shareholder value. However the stakeholder value is more difficult to evaluate. In this prevalent culture of barbarous workload to achieve a position in investment banking, the long working hours do provide a characteristic to prove excellence. Nevertheless if one incorporates the healthiness of this action, we should weigh the advantages and disadvantages. If those long working hours wouldn’t be a prerequisite in investment banking, the aspirant employees would not be incentivized to perform those hours. In this sense one can evaluate those long days are possible for a certain period of time but isn’t in the long term, which makes it unsustainable and the value transfer is from employees to shareholders. Therefore, one could say that we end up in the 4th quadrant (see Figure 2).

Proper stakeholder management at Bank of America?
The biggest issue Bank of America, and all other investment banks, face in this respect is a poor stakeholder management. One of their biggest assets, or let’s call the young recruits the rough diamonds that might sustain the bank, are kind of abused. I guess this will not be sustainable ever after. After a discussion with an investment banker that experienced this by himself he was clearly discouraging us to go to the City and especially some firms. The atmosphere is clearly below zero. You have to work even harder to prove yourself because the downturn in the market causes low employment levels. If those motivational speeches get spread around the world, talented people will try to search their luck in other industries or in other, more humane, workplaces. One way to recover from this and to balance work and life better is to tackle the extreme hour’s culture. Katerina Rudiger, head of skills and policy campaign at the Chartered Institute of Personnel and Development, emphasizes that employers try the best as possible to make an internship as valuable as possible. In that respect, she says that balance is the most important part of the internship and getting overworked is not done. But youngsters, eager to get a good job in the City do whatever it takes to be able to keep their highly rewarding job. They are also not experienced in challenging their employer and they definitely do not want to get fired due to underperformance in comparison with their peers. This results in an unhealthy lifestyle where energy drinks and eventually drugs keep them awake. It does not have to be mentioned that an unhealthy food pattern is part of this. As such, once again it is proven that this unhealthy lifestyle has to be taken care of from the top, youngsters will not want to be the first that refuses to work those long hours with the dread of being dismissed or reducing their chances on a full-time position.

Stakeholder management in the company’s CSR report
Bank of America, which seems to have a sputtering stakeholder (employee) management, issues yearly a Corporate Social Responsibility report. This report pretends to be heaven on earth concerning their responsibility. Below an important little extract. “Being a responsible business is integral to our success, and that of the customers, clients, shareholders and communities we serve around the world. Corporate Social Responsibility (CSR) is embedded in our values and informs how we conduct business, develop products and services and deliver on our goals and commitments. CSR is integrated into core areas, where we continue to focus our resources: 1. Responsible business practices 2. Strong economies 3. Environmental sustainability 4. Leadership and service 5. Arts and cultures 6. Diversity & conclusion”

Their CSR Report is marked with 181 the word “employee”. Unfortunately, overwork, working hours, and other related words are not mentioned and health is only mentioned in relation to external people. Unless that their first pillar is “responsible business practices” they do not consider the health of their employees. According to me this should be a part of their CSR Report because wide spreading praising words on how they help the environment and do volunteer work is important but has nothing to do with the in-house business practices, which should be evaluated as well. In that sense I would like to read in their CSR Report a thorough analysis on amount of average working hours, workload, perceptions of people and happiness at work survey results per department or even function. This might establish a different light on the work at investment banking. Everyone knows that hard working is involved and high reward is given but those results might incentivize investment banks and other industries to create a visible competition between the different companies. As such young graduates can evaluate the company on this basis and choose for themselves if those working hours are feasible for them.

Healthiness of investment banking jobs
To evaluate the healthiness of working in investment banking, the University of Southern California conducted a study where they followed two-dozen entry-level investment bankers in their early career. They first two years the people stay energetic even with a tight schedule of on average 100 hours a week. However, two years later, the physical issues raised. Sleep deprived, allergies, substance addictions, Crohn’s disease, etc. where part of the toll of being an investment banker. After two more years, the group split up in two 60-40 divided camps. The first kept on exhausting their bodies and the latter realized the huge drawbacks and prioritized their health. This shows us the huge impacts those brutal working hours can have on a body. Those are again pitfalls in the CSR report, because it is broadly known that investment banking is heavy but interns or fresh graduates might not consider those big disadvantages of the life of an investment banker.

One firm has to break through the vicious circle
By mean of conclusion one can state that the most import thing to happen in the big investment banking firms, who should be the good example, is to break the vicious circle that is ongoing from junior to senior. Being baptised by working inhumane hours is not the way of extracting the best out of people, as can be proved by the diminished returns to labour and is especially really bad for the health of the bankers. Furthermore, interns and freshly graduates should be made aware of the possible health issues posed by the longer working hours. This can be done by the means of the CSR report, where a specific report can be made from every department and its workload and happiness at work. The new employees can evaluate themselves if this is something they are willing to go through and might be the influencing factor in choosing an employer. Lastly, the focus in this paper was on investment banking but a lot of other sectors can be thought of where long working hours are also a part of the job (e.g. strategy consulting, private equity, etc.).

References

Blake, M. (2013, November 8). Goldman Sachs memo insists its employees not work on weekends – except for Sundays (and, of course, some Saturdays). Mail Online. Retrieved on: December 23, 2013. http://www.dailymail.co.uk/news/article-2492498/Goldman-Sachs-memo-says-employees-shouldnt-work-weekends.html

Brennan, J. (2013, October 3). Hours Worked and Productivity. Bleeding Heart Libertarians. Retrieved on: December 23, 2013. http://bleedingheartlibertarians.com/2013/10/hours-worked-and-productivity

Di Meglio, F. (2013, August 29). Why Investment Banking Jobs Should Come With a Surgeon General’s Warning. Bloomberg Businessweek. Retrieved on: December 24, 2013. http://www.businessweek.com/articles/2013-08-29/why-investment-banking-jobs-should-come-with-a-surgeon-generals-warning

Gallagher, B. (2013, August 20). Slavery in the City: Death of 21-year-old intern Moritz Erhardt at Merrill Lynch sparks furore over long hours and macho culture at banks. The Independent. Retrieved on: December 22, 2013. http://www.independent.co.uk/news/uk/home-news/slavery-in-the-city-death-of-21yearold-intern-moritz-erhardt-at-merrill-lynch-sparks-furore-over-long-hours-and-macho-culture-at-banks-8775917.html

Garside, J & Treanor, J. (2012, March 14). Goldman Sachs director quits 'morally bankrupt' Wall Street bank. The Guardian. Retrieved on: December 22, 2013. http://www.theguardian.com/business/2012/mar/14/goldman-sachs-director-quits-morally-bankrupt

Giang, V. (2012, February 28). Investment Banking May Cause Insomnia, Alcoholism, Heart Palpitations, Eating Disorders And Explosive Temper. Business Insider. Retrieved on: December 23, 2013. http://www.businessinsider.com/investment-banking-may-cause-insomnia-alcoholism-hearth-palpitations-eating-disorders-and-explosive-temper-2012-2

Goldsmith, B. (2013, August 22). Bank of America intern: Was he worked to death? The CS Monitor. Retrieved on: December 22, 2013. http://www.csmonitor.com/Business/Latest-News-Wires/2013/0822/Bank-of-America-intern-Was-he-worked-to-death

Kessler, Z. (2013, August 29). Does Intern's Death Show We Need to Take a Break? Bloomberg Opinion. Retrieved on: December 22, 2013. http://www.bloomberg.com/news/2013-08-29/does-intern-s-death-show-we-need-to-take-a-break-.html

McGregor, J. (2009, November 5). Top Managers Are Quitting, Without a New Job. Bloomberg Businessweek. Retrieved on: December 22, 2013. http://www.businessweek.com/magazine/content/09_46/b4155072824076.htm

Moshinsky, B. (2013, November 23). Bank of America Intern’s 5 A.M. E-Mail Before Death Worried Mom. Bloomberg Personal Finance. Retrieved on: December 22, 2013. http://www.bloomberg.com/news/2013-11-22/bank-of-america-staff-quizzed-as-coroner-probes-intern-s-death.html

Wally, M. (2013, August 22). Bank of America Intern's Death Puts Finance Internships Under the Microscope: Workers Crunch Numbers for Days, Take Drugs to Stay Awake. Headlines & Global News. Retrieved on: December 24, 2013. http://www.hngn.com/articles/10676/20130822/bank-america-interns-death-puts-finance-internships-under-microscope-workers-crunch-numbers-days-drugs-stay-awake.htm

Administrative Science Quarterly Journal, Transcending Socialization: A Nine-Year Ethnography of the Body’s Role in Organizational Control and Knowledge Workers’ Transformation, Alexandra Michel, University of Southern California, 31 January 2012

Baeten, X. (2013). What is CSR? [PowerPoint slides]. Retrieved from https://www.edu.vlerick.com

Corporate Social Responsibility at Bank of America, 2012 CSR Report, Bank of America, 2012

Dealbook. (2007, December 21). Drugs and Today’s Wall Street. The New York Times. Retrieved on: December 23, 2013. http://dealbook.nytimes.com/2007/12/21/drugs-and-todays-wall-street/?_r=0

De Boe, S. (2013, November 29) Insights from a buy-side point of view. Lecture presented at Vlerick Business School, Ghent.

‘Superstar’ Bank of America intern who died after ’72 hours straight at desk’ felt pressured to excel. (2013, August 21). Financial Post. Retrieved on: December 22, 2013. http://business.financialpost.com/2013/08/21/bank-america-intern-moritz-erhardt/

--------------------------------------------
[ 1 ]. Moshinsky, B. (2013, November 23). Bank of America Intern’s 5 A.M. E-Mail Before Death Worried Mom. Bloomberg Personal Finance. Retrieved on: December 22, 2013. http://www.bloomberg.com/news/2013-11-22/bank-of-america-staff-quizzed-as-coroner-probes-intern-s-death.html
[ 2 ]. Dealbook. (2007, December 21). Drugs and Today’s Wall Street. The New York Times. Retrieved on: December 22, 2013. http://dealbook.nytimes.com/2007/12/21/drugs-and-todays-wall-street/?_r=0
[ 3 ]. Kessler, Z. (2013, August 29). Does Intern's Death Show We Need to Take a Break? Bloomberg Opinion. Retrieved on: December 22, 2013. http://www.bloomberg.com/news/2013-08-29/does-intern-s-death-show-we-need-to-take-a-break-.html
[ 4 ]. C.W. & A.J.K.D. (2013, September 24). Get a Life. The Economist. Retrieved on: December 22, 2013. http://www.economist.com/blogs/freeexchange/2013/09/working-hours
[ 5 ]. Brennan, J. (2013, October 3). Hours Worked and Productivity. Bleeding Heart Libertarians. Retrieved on: December 23, 2013. http://bleedingheartlibertarians.com/2013/10/hours-worked-and-productivity
[ 6 ]. Baeten, X. (2013). What is CSR? [PowerPoint slides]. Retrieved from https://www.edu.vlerick.com
[ 7 ]. De Boe, S. (2013, November 29) Insights from a buy-side point of view. Lecture presented at Vlerick Business School, Ghent.
[ 8 ]. Wally, M. (2013, August 22). Bank of America Intern's Death Puts Finance Internships Under the Microscope: Workers Crunch Numbers for Days, Take Drugs to Stay Awake. Headlines & Global News. Retrieved on: December 24, 2013. http://www.hngn.com/articles/10676/20130822/bank-america-interns-death-puts-finance-internships-under-microscope-workers-crunch-numbers-days-drugs-stay-awake.htm
[ 9 ]. Corporate Social Responsibility at Bank of America, 2012 CSR Report, Bank of America, 2012
[ 10 ]. Administrative Science Quarterly Journal, Transcending Socialization: A Nine-Year Ethnography of the Body’s Role in Organizational Control and Knowledge Workers’ Transformation, Alexandra Michel, University of Southern California, 31 January 2012

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