“WASHINGTON—President Biden set off a heated identity politics debate less than 24 hours into his presidency when he signed a gender discrimination order that has drawn heat from critics who accuse him of erasing women’s rights. Language in the order would allow transgender women to participate in women’s sport leagues. The policy seeks to enforce a Supreme Court ruling from last year that prohibits discrimination on the basis of someone’s gender identity and sexual orientation” (Bowden, 2021). 

On Wall Street and the financial services industry in particular, it’s tough being a women, since the business cultures are known to be male-dominated. “All of the top banks are run by men. A Catalyst study reports that women account for less than 17 percent of senior leaders in investment banking. In private equity, women comprise only 9 percent of senior executives and only 18 percent of total employees, according to a 2017 report by Preqin. At hedge funds and private debt firms, the numbers are similarly low—women hold just 11 percent of leadership roles” (Boorstein, 2018).

The following case documents major issues women have had, and continue to have, getting promoted and earning the same or comparable wages and bonuses as their male counterparts in the financial services industries and Wall Street in particular. It seems that only some class-action lawsuits that succeed and are brought on by the courage, rights, and expert legal help have brought awareness to these issues. Here are some of those lawsuits and the stories underlying them.

Allison Schieffelin and Morgan Stanley

On June 12, 2004, Morgan Stanley agreed to pay $54 million to settle dozens of claims from women who alleged that the securities firm denied them pay increases and promotions because of their gender. The case, filed by the Equal Employment Opportunity Commission (EEOC) on September 10, 2001, resulted from repeated complaints by Allison Schieffelin, a 43-year-old former convertible-bond sales clerk who worked in the firm’s institutional-stock division for 14 years. Schieffelin earned more than $1 million a year, making her one of the highest-paid and highest-ranking women on Wall Street to publicly challenge the industry’s pay and promotion practices. Schieffelin claims that she was trapped under a glass ceiling and continuously denied promotion to managing director despite being the top performer in her department. The EEOC claims that in addition to being repeatedly denied promotions and pay raises, women employees in Schieffelin’s division “endured coarse behavior and lewd comments from their male colleagues and supervisors.” Moreover, firm-organized sales outings with clients to golf resorts and strip clubs excluded women.

Of the $54 million settlement, $12 million was paid directly to Schieffelin. About $40 million will be used to settle complaints from an estimated 100 current and former female employees of the institutional-stock division. The remaining $2 million was used to enhance anti-discrimination training at the firm. In addition to the monetary settlement, Morgan Stanley must also fund a program to have an appointed outsider monitor hiring, pay, and promotion practices for a three-year period. Although the settlement seems large, it is merely “pocket change” to a firm like Morgan Stanley; the $54 million represents approximately 2 percent of the $2.45 billion in profits the firm earned in the first half of fiscal year 2004. 

Background on Schieffelin et al. v. Morgan Stanley

Allison Schieffelin first complained of Morgan Stanley’s working environment in a 1995 written review of her boss, stating, “He makes the convertible department and the firm by extension an uncomfortable place for women.” During that same year, she also submitted an internal complaint about “unwelcome advances” from one of her male managing directors. At the time, she thought that management would be pleased with the tactful manner in which she handled the issues; however, today she feels management placed her on a “watch list” instead.

In December 1998, after three years of withstanding the men’s locker-roomtype atmosphere, in which the male employees openly “swapped off-color jokes and tales of sexual exploits and treated their female colleagues as inferior,” Schieffelin took her harassment and discrimination complaints beyond the firm’s executives to the EEOC. She hoped that the firm would see that she had been a dedicated employee throughout her entire career and that the issues with the firm’s pay and promotion practices needed to be amended. Instead, she claims the firm “embarked on a campaign to get me to quit.” She was fired in October 2001 for what the firm claims to be misconduct after a heated confrontation with her supervisor; however, both Schieffelin and the EEOC viewed her firing as illegal retaliation for her discrimination complaints. One year after Schieffelin complained, Morgan Stanley’s New York convertibles department, the department in which Schieffelin worked, promoted Gay Ebers-Franckowiak to managing director—the first female managing director in that department; many people believe that this was no coincidence.

Morgan Stanley denied all discrimination charges and claimed that their female employees were and are treated equally. The EEOC planned to reveal evidence at the trial proving otherwise. The anticipated evidence indicated that some male employees of the firm ordered breast-shaped birthday cakes and hired strippers to entertain at office parties. The evidence supposedly provided statistics regarding the disparities between female and male promotion and pay within the firm. The trial was scheduled to begin July 12, 2004; however, a settlement was wrapped up mere minutes before opening arguments began. As part of the settlement, payroll statistics that showed whether or not there was a pattern of discrimination were sealed.

An Isolated Occurrence or an Industry-Wide Problem?

The allegations made against Morgan Stanley are not new to the securities industry. Several previous cases, in addition to statistics produced by the Securities Industry Association (SIA), indicate that sex discrimination is a persistent problem on Wall Street.

In April 2004, Merrill Lynch agreed to pay $2.2 million to Hydie Sumner as part of a class-action lawsuit brought by more than 900 women claiming the financial giant had a long history of gender discrimination. Sumner wanted her old job back; she also said that she wanted to be a Merrill Lynch manager in order to make changes at the firm. “I thought, one day, I’ll be a manager and I’ll have a choice, and I won’t manage like him [Stephen McAnally, former manager of the Merrill Lynch San Antonio office],” said Sumner. As of early 2005, Merrill Lynch paid Sumner $1.9 million but was fighting the other $300,000, indicating that this payment would “not be considered until the issues relating to Ms. Sumner’s reinstatement at the firm are resolved.” 

In a more recent lawsuit, Stephanie Villalba, former head of Merrill Lynch’s private client business in Europe, sued for $13 million on gender-bias charges. She claimed that her male boss had difficulty accepting her in a senior position and, as a result, she was “bullied, belittled, and undermined.” In early 2005, an employment tribunal in the United Kingdom ruled in favor of “Villalba’s claim of victimization on certain issues, that included bullying e-mails in connection with a contract, but found no evidence of a ‘laddish culture’ at the bank.” Villalba intends to appeal the ruling. 

In February 2004, Susanne Pesterfield, a former broker for Smith Barney, settled her case with the investment firm on the eve of an arbitration hearing. She alleged that during her seven years at the firm she endured a “pattern of sexual harassment and a male-dominated culture that included trips to strip clubs.” She described a working environment that was “hostile to women and in which women weren’t given the same opportunities to succeed as men were given.” She claimed that her male colleagues were better paid and received better leads for potential clients.

Pesterfield’s accusations were not new to Smith Barney. A class-action lawsuit brought by female employees in 1996 led to a 1998 settlement in which the firm’s parent company, Citigroup, Inc., paid out close to $100 million. The infamous case has been referred to as the “Boom-Boom Room,” in reference to the basement “party room” in the Garden City branch of what was then Shearson Lehman Brothers, wherein discrimination and sexual harassment occurred. Among other things, the conversations that took place among the male employees went beyond their accomplishments on the trading floor to include their latest accomplishments in the bedroom. Shearson’s manager took a “boys will be boys” approach that encouraged obscene comments and lewd behavior.

In her book, Tales from the Boom-Boom Room, Susan Antilla provides a detailed account of the workplace culture at Shearson. According to Antilla, “It was a time when men in branch offices of brokerage firms were encountering significant numbers of female colleagues for the first time. For some of them, it was unsettling.” In the late 1990s, many well-educated women entered the financial services industry in hopes of finding great opportunities. Instead, they found an industry that continued to be dominated by white males and an environment that belittled and repressed women. 

The acts of alleged sex discrimination abound; nearly 3,000 women filed claims in 1996 and 1997 against Smith Barney and Merrill Lynch. Although most of the women settled, some did not, including Nancy Thomas, Sonia Ingram, Laura Zubulake, Deborah Paulhus, and Neill Sites. Perhaps most notable is the case of Nancy Thomas, a broker at Merrill Lynch for 18 years. Among the numerous allegations of sex discrimination made by Thomas, one is particularly salacious. Thomas alleges that in 1991 “someone left her a package in the mailroom with a dildo, lubricating cream, and an obscene poem.” An arbitration hearing was held in New York on September 13, 2004; arbitrators scheduled an additional 18 hearing sessions through July 2005. Merrill Lynch maintained that none of the testimony given as of late November 2004 “support[ed] even one of Thomas’s allegations.”....

Questions for Discussion

1. Is business ethics relevant to the topic and examples in this case, or is this just business as usual? Explain.

2. What are the ethical implications of the onetime arbitration requirement that prevented Wall Street employees from seeking redress through the court system?

3. Why is the securities and investment banking business male-oriented and dominated?

4. Why does sex discrimination seem to persist on Wall Street in spite of the negative publicity of lawsuits and monetary costs of settlements?

5. What can or should be done to transform the persistent culture of sex discrimination on Wall Street?

6. Would you like working on Wall Street as a woman? Explain.

7. As a man or woman, what lessons would you take from this case if you accepted a professional job in a Wall Street firm?