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Selling Women Short: Gender and Money on Wall Street
     

Selling Women Short: Gender and Money on Wall Street

by Louise Marie Roth
 

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Rocked by a flurry of high-profile sex discrimination lawsuits in the 1990s, Wall Street was supposed to have cleaned up its act. It hasn't. Selling Women Short is a powerful new indictment of how America's financial capital has swept enduring discriminatory practices under the rug.

Wall Street is supposed to be a citadel of pure economics,

Overview

Rocked by a flurry of high-profile sex discrimination lawsuits in the 1990s, Wall Street was supposed to have cleaned up its act. It hasn't. Selling Women Short is a powerful new indictment of how America's financial capital has swept enduring discriminatory practices under the rug.

Wall Street is supposed to be a citadel of pure economics, paying for performance and evaluating performance objectively. People with similar qualifications and performance should receive similar pay, regardless of gender. They don't. Comparing the experiences of men and women who began their careers on Wall Street in the late 1990s, Louise Roth finds not only that women earn an average of 29 percent less but also that they are shunted into less lucrative career paths, are not promoted, and are denied the best clients.

Selling Women Short reveals the subtle structural discrimination that occurs when the unconscious biases of managers, coworkers, and clients influence performance evaluations, work distribution, and pay. In their own words, Wall Street workers describe how factors such as the preference to associate with those of the same gender contribute to systematic inequality.

Revealing how the very systems that Wall Street established ostensibly to combat discrimination promote inequality, Selling Women Short closes with Roth's frank advice on how to tackle the problem, from introducing more tangible performance criteria to curbing gender-stereotypical client entertaining activities. Above all, firms could stop pretending that market forces lead to fair and unbiased outcomes. They don't.

Editorial Reviews

Library Journal
Although the old cigarette commercial proclaimed, "You've come a long way, baby," this book reveals that we still have a long way to go regarding gender equality. Roth (sociology, Univ. of Arizona) studied a three-year cohort of elite MBA graduates who started in top Wall Street firms in the 1990s. She discovered that dramatic pay inequalities still persist, even between men and women with identical qualifications and experience. While blatant discrimination based on gender and race has virtually disappeared in politically correct American businesses, a more subtle and widespread discrimination remains. Wall Street workers describe here how exclusion from peer networks, unfair account assignments, uneven mentoring opportunities, and cultural assumptions combine to affect women's career paths and compensation rates. Roth's research busts the idea that meritocracy works, illustrating how compensation plans that aim to pay for performance can actually produce systematic inequities. This readable account concludes by offering recommendations to help businesses come an even longer way toward true gender equality. Recommended for larger public libraries with strong business and/or women's studies collections and for academic libraries.-Wendy Wendt, Marshall-Lyon Cty. Lib., MN Copyright 2006 Reed Business Information.
Booklist
This research will be helpful to women if powerful Wall Street management earns of the findings and takes action.
— Mary Whaley
Financial Times
Selling Women Short is a thoughtful examination of how ostensibly merit-based systems can result in unequal outcomes.
— Brook Masters
Choice
Highly recommended. . . . Louise Marie Roth provides a valuable addition to the literature on the earnings gap between women and men. . . . The reader gains a multifaceted description and statistical analysis of factors affecting careers of both men and women, including the very successful.
International Review of Modern Sociology
Roth's well-written, well-researched book deftly integrates qualitative and quantitative data in a manner that makes it accessible to a variety of audiences who are interested in the topic of pay inequality.
— Sarah Y. Moore
American Journal of Sociology
Clearly written in jargon-free and accessible language, it should appeal to a general audience, as well as being suitable for either undergraduate- or graduate-level courses in gender, labor, or economic sociology. It could also productively be used in business and finance classes at the graduate or undergraduate level. Managers or university administrators interested in combating gender inequality could learn from this book as well. . . . I highly recommend the book as a significant contribution to our understanding of the subtle ways in which discrimination operates on Wall Street and beyond.
— Abigail C. Saguy
Feminist Economics
[T]his is a highly teachable book that could be assigned in economics, business, labor, and women's studies courses at either the undergraduate or graduate levels. . . . The combination of the academic study with the journalistic account should lead to a spirited discussion among students of the ways in which the structures of organizations allow people to realize opportunity or limit their success.
— Swan Yohn
Booklist - Mary Whaley
This research will be helpful to women if powerful Wall Street management earns of the findings and takes action.
Financial Times - Brook Masters
Selling Women Short is a thoughtful examination of how ostensibly merit-based systems can result in unequal outcomes.
International Review of Modern Sociology - Sarah Y. Moore
Roth's well-written, well-researched book deftly integrates qualitative and quantitative data in a manner that makes it accessible to a variety of audiences who are interested in the topic of pay inequality.
American Journal of Sociology - Abigail C. Saguy
Clearly written in jargon-free and accessible language, it should appeal to a general audience, as well as being suitable for either undergraduate- or graduate-level courses in gender, labor, or economic sociology. It could also productively be used in business and finance classes at the graduate or undergraduate level. Managers or university administrators interested in combating gender inequality could learn from this book as well. . . . I highly recommend the book as a significant contribution to our understanding of the subtle ways in which discrimination operates on Wall Street and beyond.
Feminist Economics - Swan Yohn
[T]his is a highly teachable book that could be assigned in economics, business, labor, and women's studies courses at either the undergraduate or graduate levels. . . . The combination of the academic study with the journalistic account should lead to a spirited discussion among students of the ways in which the structures of organizations allow people to realize opportunity or limit their success.
From the Publisher
"This research will be helpful to women if powerful Wall Street management learns of the findings and takes action."—Mary Whaley, Booklist

"This book reveals that we still have a long way to go regarding gender equality. . . . While blatant discrimination based on gender and race has virtually disappeared in politically correct American businesses, a more subtle ad widespread discrimination remains. . . . This readable account concludes by offering recommendations to help businesses come an even longer way toward true gender equality."Library Journal

"Selling Women Short is a thoughtful examination of how ostensibly merit-based systems can result in unequal outcomes."—Brook Masters, Financial Times

"Highly recommended. . . . Louise Marie Roth provides a valuable addition to the literature on the earnings gap between women and men. . . . The reader gains a multifaceted description and statistical analysis of factors affecting careers of both men and women, including the very successful."Choice

"Roth's well-written, well-researched book deftly integrates qualitative and quantitative data in a manner that makes it accessible to a variety of audiences who are interested in the topic of pay inequality."—Sarah Y. Moore, International Review of Modern Sociology

"Clearly written in jargon-free and accessible language, it should appeal to a general audience, as well as being suitable for either undergraduate- or graduate-level courses in gender, labor, or economic sociology. It could also productively be used in business and finance classes at the graduate or undergraduate level. Managers or university administrators interested in combating gender inequality could learn from this book as well. . . . I highly recommend the book as a significant contribution to our understanding of the subtle ways in which discrimination operates on Wall Street and beyond."—Abigail C. Saguy,American Journal of Sociology

"[T]his is a highly teachable book that could be assigned in economics, business, labor, and women's studies courses at either the undergraduate or graduate levels. . . . The combination of the academic study with the journalistic account should lead to a spirited discussion among students of the ways in which the structures of organizations allow people to realize opportunity or limit their success."—Swan Yohn, Feminist Economics

Product Details

ISBN-13:
9781400840793
Publisher:
Princeton University Press
Publication date:
06/27/2011
Sold by:
Barnes & Noble
Format:
NOOK Book
Pages:
272
File size:
1 MB

Read an Excerpt

Selling Women Short

Gender and Money on Wall Street
By Louise Marie Roth

Princeton University Press

Copyright © 2006 Princeton University Press
All right reserved.

ISBN: 978-0-691-12643-2


Introduction

NOt so long ago-as recently as the mid-1980s-Wall Street was one big men's club of smoke-filled rooms and strippers on the trading floor. Women, to the degree that they were welcome at all, were relegated to roles as secretaries and sex objects. Firms blatantly discriminated against the few women who did fight to become traders, and court cases demonstrate a long history of groping, name calling, come-ons, blocked mobility, and sexual pranks. Since then, women have made great inroads into jobs on Wall Street, and Wall Street firms have largely cleaned up their act. You would be hard-pressed to find a "boom-boom room" associated with any of the major or minor firms today.

Despite the overall improvement in the climate in these firms, since the late 1990s, three major Wall Street firms-Citigroup's Smith Barney, Merrill Lynch, and Morgan Stanley-have each paid out more than $100 million to resolve sex discrimination suits, even while denying that any systematic discrimination against women occurs within their walls. On April 19, 2004, for instance, a panel of arbitrators awarded $2.2 million to Hydie Sumner, a female stockbroker and one of 2,800 women who brought a class action suit against Merrill Lynch for sex discrimination. Morgan Stanley also paid a settlement of $54 million on the eve of court proceedings in an EEOC sex discrimination case. The lead plaintiff, Allison Schieffelin, received $12 million, and the settlement granted another $2 million to diversity programs to promote the advancement of women within the firm.

Allison Schieffelin's case claimed that she and other female workers had been denied equitable pay and promotions, and had been excluded from company functions because of their gender. The EEOC investigated her charges and found evidence that less-deserving men had been promoted while Schieffelin, a high producer in international equity sales, remained in a lower-level position, and that the firm had retaliated against her when she filed complaints. Morgan Stanley's spokesperson, Ray O'Rourke, said that the firm "emphatically disagrees with the findings" and "does not practice or condone discrimination of any kind."

By resolving these cases out of court while denying the allegations, Wall Street firms have avoided public scrutiny of their corporate culture and how gender inequality persists within it. And although the firms denied any wrongdoing-standard in such agreements, and therefore somewhat meaningless-the settlements serve as an indication that discrimination on Wall Street has shifted from blatant, socially unacceptable behavior to an endemic firm- and industry-wide discrimination against women and minorities. The question is, why? These firms, more than others, supposedly pay for performance by tying bonus amounts to revenue production-if you make a Wall Street firm a lot of money, you get a large bonus-so how is it that they get away with paying women less than similarly qualified men? And what can we learn from women on Wall Street about gender inequality more generally?

At a broad level, these are questions about the processes that lead to a well-known and much discussed outcome: gender inequality in the workplace. They're also questions about how paying workers based on performance evaluations affects equality when workers do not start out as equals and how systems established to level the playing field and to make companies transparent can do more harm than good. Understanding how gender inequality persists among similar men and women illuminates how inequality can persist even if men and women perform similarly. The rest of Selling Women Short explains just how this happens-how the road to continued gender discrimination is paved with good intentions-and offers some suggestions for breaking the mold.

This book compares men and women who worked on Wall Street during the long bull market of the 1990s, when opportunities in the securities industry were abundant. In Wall Street parlance, "securities" refers to shares, options, and derivatives that corporations issue on the public financial markets. This market environment should have provided a best-case scenario for the advancement of underrepresented groups like women. Yet men and women who obtained comparable training and entered the marketplace during the same period still found themselves separated by substantial gender inequality. Within the booming financial markets of the 1990s, they reveal how an institutionalized bonus pay system, which should have been the great equalizer, had negative effects on women. The case histories discussed in subsequent chapters can also reveal the strategies of some workers to reduce or eliminate their structural disadvantage.

Women on Wall Street

Women first entered Wall Street as professionals in the mid1970s. At that time they faced blatant discrimination: they were excluded or ejected from meetings in all-male clubs and were often told outright that they would receive less money than men. The glass ceiling blocking their promotions was more obvious, as was their clear underpayment relative to their male peers-this despite sometimes superior performance. These women had only two options: to endure compensation discrimination or to leave the profession.

This type of barefaced discrimination became less prevalent in the 1980s, largely because it clearly violated Title VII, the federal law that prohibits sex discrimination in hiring and promotion, and because the most flagrant incidences of discrimination had been attacked in court. In the early 1980s, recruiters for Goldman Sachs, for instance, asked female MBAs if they were willing to have abortions to stay on the fast track, which violated the Pregnancy Discrimination Act (PDA) of 1978 (discrimination on the basis of pregnancy is illegal sex discrimination). A group of Stanford MBAs complained in 1984, producing a public outcry and leading to changes in the firm's interview questions. Views of women as reproductive time bombs did not completely disappear, but the most obvious discrimination on that basis has.

Legal challenges motivated Wall Street firms to develop internal policies and procedures to comply with equal employment opportunity guidelines and to address discrimination in hiring and promotion, sexual harassment, and maternity leave. At least on the surface, these firms made efforts to hire and retain qualified women. The most obvious barriers to women's success eroded in the late 1980s, when most investment banks promoted their first female managing directors and partners. But at the same time, the sex discrimination cases of the last decade imply that discrimination and a culture of sexual harassment remained defining features of the industry.

Having won court cases to institute formal policies against discrimination, by the 1990s women on Wall Street started to fight back against the male-dominated culture of the industry, filing class action suits against major securities firms. In some cases, like the infamous "boom-boom room" case against Smith Barney, these suits focused partly on verbal and physical sexual harassment. In 1995, after enduring years of put-downs, lewd remarks, sexual gestures, and practical jokes, as well as being denied promotions and access to the best accounts, three women at Smith Barney's Garden City brokerage office filed a class action suit charging the firm with sex discrimination and sexual harassment. They alleged that "the office maintained a fraternity-house culture" that was hostile and degrading to women. (The "boom-boom room" was a party room in the basement of the Garden City office where male brokers held parties that excluded women or subjected women to sexual innuendo and pranks.) The suit claimed that the firm had tolerated a hostile and discriminatory work environment, and Smith Barney settled before it went to court. While the firm accepted no culpability, the settlement led to an overhaul of its sexual harassment and diversity policies.

A similar class action suit against Merrill Lynch focused primarily on patterns of economic disparity, although sexual harassment was also an issue. Female brokers at Merrill entered the class action suit en masse because of discrimination in wages, promotions, account distributions, and maternity leaves. They were especially concerned about the allocation of accounts from departing brokers, walk-ins, leads, and referrals, which they claimed went disproportionately to male brokers. When a panel of arbitrators awarded Hydie Sumner $2.2 million on April 19, 2004, it was the first legal ruling to find that a Wall Street firm engaged in systematic discrimination.

In addition to these class actions, individual women also filed suits. In 1999, a former employee of J. P. Morgan sued the firm for barring her from working as a trader because of her gender. Around the same time, Allison Schieffelin filed her highly publicized gender discrimination lawsuit with the EEOC after she was passed over for promotion to managing director in Morgan Stanley's international equity sales division. Morgan Stanley only reluctantly, and under duress, cooperated with the investigation. The EEOC decided to pursue the case, in their first ruling against Wall Street in over a decade. The day before the case was scheduled to go to court, on July 13, 2004, Morgan Stanley settled for a total of $54 million. The fact that these lawsuits have found some Wall Street firms liable for gender discrimination reveals that obstacles for women remain entrenched, even after past legislative actions have removed the most blatant displays of gender bias. The question remains, however, why such barriers exist and how they persist.

Equal employment legislation may have paved the way for women's entrance into the securities industry, but more than half of all employees in the industry are still white men (even when female-dominated positions like administrative assistants and sales assistants are included). The figure rises to over 70 percent among investment bankers, traders, and brokers, and to over 80 percent among executive managers. While the number of women in professional positions has risen, and securities firms have a heightened awareness of equal employment opportunity laws, Wall Street remains a male-dominated environment. And while the most obvious forms of differential treatment have been squelched, more subtle forms of discrimination still flourish on Wall Street.

Gender Discrimination and Employment Law

Gender discrimination can take multiple forms, and employment law contains provisions for blatant and subtle forms of discrimination, sexual harassment, and pregnancy discrimination. The 1963 Equal Pay Act and Title VII of the 1964 Civil Rights Act legally protect workers from discrimination on the basis of sex in hiring, promotion, and pay. Title VII prohibits disparate treatment of applicants or employees, defined as treating workers differently based on their membership in a protected class. For example, policies that specify that only men be hired for a job in which gender is irrelevant to performance are facially discriminatory. Early female entrants to Wall Street faced differential treatment that clearly meets this definition of illegal sex discrimination. Clearly, there is no gender-specific requirement for jobs on Wall Street, and securities firms have eliminated facially discriminatory policies and managerial behavior to protect themselves from disparate treatment claims.

In most cases, though, direct evidence of discrimination is rare, and discrimination may take more subtle and insidious forms. Some subtle forms of discrimination are also recognized under Title VII. Since 1971, employment law has recognized discrimination when an employer may not be motivated by discriminatory intent, but uses a facially neutral employment practice that has an unjustified adverse impact on members of a protected class. These are cases where facially neutral practices have a disparate impact. Examples of practices that may be subject to a disparate impact challenge include written tests, height and weight requirements, and subjective procedures like interviews. For example, entrance exams and hiring criteria on Wall Street were heavily biased in favor of white, heterosexual men until the late 1970s. A landmark decision against Merrill Lynch in 1976 eliminated entrance exams with questions such as, "When you fight with your wife, which of you usually wins?" and "When you meet a woman, what interests you the most about her?" (The correct answer was "her beauty," while the fewest points were scored for "her intelligence.") When Helen O'Bannon failed the entrance exam for its broker-trainee program in 1972, she sued for sex discrimination and won, costing the firm over $4 million. Of course, disparate impact is not always as clear as in the O'Bannon case and subtle discrimination is always harder to prove than its more blatant counterpart-and therefore more common. Employers can also legally justify practices with a disparate impact on members of a protected class if the practices fulfill some "essential" or "indispensable" business necessity.

Title VII also recognizes sexual harassment as a form of illegal sex discrimination. Many of the lawsuits against Wall Street firms, most notably the boom-boom room case, involved sexual harassment claims. Sexual harassment may take the form of a quid pro quo, in which submission to unwelcome sexual advances or requests for sexual favors is made a condition of an individual's employment or is used as a basis for employment decisions. It may also take the form of a hostile work environment, in which repeated put-downs and come-ons have the purpose or effect of unreasonably interfering with an individual's work performance or create an intimidating, hostile, or offensive work environment. This type of hostile work environment was at the heart of the boom-boom room case against Smith Barney. But while courts have decided some high-profile sexual harassment cases in favor of plaintiffs, they decide the majority of cases in favor of employers. Sexual harassment is notoriously difficult to prove, and most workers who suffer from it never bring attention to their experiences.

But here's the catch to all of these protections, the catch that rests at the heart of this book: Existing employment laws are based on principles of equal treatment and are written to be gender neutral, and these laws assume that the sexes are "similarly situated" and, therefore, that men and women should be treated the same. This belies the fact that there are situations in which men and women are differently situated, pregnancy being the most obvious example. When men and women are differently situated, treating them the same may have an adverse impact on women. At the same time, differential treatment in cases where men and women are differently situated is often not viewed as discrimination and not actionable. As a result, gender-neutral laws guaranteeing equal protection have failed to produce gender-equal outcomes in most employment settings. This may also be a consequence of the fact that subtle forms of discrimination are difficult to demonstrate and address through the legal system, and definitions of some types of discrimination like sexual harassment are widely variable. Subtle discrimination typically occurs through unconscious preferences and prejudices that most people have, but of which they are unaware. These preferences and prejudices influence how they perceive other people, their competencies, and their performance at various tasks. On Wall Street, these unconscious considerations are particularly important because pay is awarded on the basis of performance evaluations.

On Wall Street, most widespread, blatant discrimination has largely disappeared, and certainly firms have removed any official (or unofficial) sanction from such behavior. Instead, in the face of numerous lawsuits, they have instituted programs that seek to treat men and women the same-gender-neutral practices that reward employees based on performance and apparently objective measures. Given that men and women started in different positions relative to one another, these practices only contribute to the gap. And the objective measures, which often turn out to be subjective perceptions, only contribute to the ongoing problem.

(Continues...)



Excerpted from Selling Women Short by Louise Marie Roth Copyright © 2006 by Princeton University Press. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

What People are Saying About This

Martha Burk
Louise Marie Roth provides a thorough analysis of sex discrimination on Wall Street, with implications far beyond the financial sector.
Martha Burk, National Council of Women's Organizations
Kathleen Gerson
This first-rate work is poised to join a small circle of influential books tackling the question of how gender inequality persists amid the avowedly merit-based segments of the American economy. Clearly presented and written in an engaging style, Selling Women Short is the only book I have seen that compares 'successful' and 'derailed' women and men, thus making it possible to disentangle the influence of gender from other, more 'gender neutral' factors that shape the career trajectories of workers in high-powered jobs.
Kathleen Gerson, New York University, coauthor of "The Time Divide: Work, Family, and Gender Inequality"
Lotte Bailyn
A fascinating (and depressing) account of what goes on on Wall Street. The personal histories and reports of experience are vivid and carry the story well.
Lotte Bailyn, Massachusetts Institute of Technology, author of "Breaking the Mold: Redesigning Work for Productive and Satisfying Lives"

Meet the Author

Louise Marie Roth is Assistant Professor of Sociology at the University of Arizona.

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