Women Rally on Wall Street
Recent Merrill Lynch lawsuit shows need for change in securities industry.
Donna Brennan wanted a career on Wall Street. And she got one, aggressively going after the technical knowledge and kind of client base required to succeed.
But she says the price she paid was high. During her six years in the securities industry, Ms. Brennan says she endured insults, inappropriate behavior, and outright sexual harassment.
"It's a tough business," says Ms. Brennan. "For women, it can be brutal."
While Americans have apparently decided to withhold judgment on the Paula Jones sexual-harassment charges against President Clinton, Wall Street has been forced to face the issue head on.
In the past two years, a series of high-profile sexual harassment and discrimination cases have torn the veneer off the securities industry. In the process, they have exposed a world that is still predominantly white, male, and, according to allegations, rife with discrimination. But the revelations have also prompted industry leaders to act. They've committed to increasing the number of women and minority brokers and backed a move to end the mandatory arbitration of employment-discrimination practices. That longtime practice leaves the resolution of such cases in the industry's own hands. The changes could be more fundamental in the securities industry than the impact of the New York Stock Exchange's pending decision on whether to move its trading floor for the first time since 1903.
"Wall Street serves America, but it doesn't yet look like America," says Arthur Levitt, chairman of the Securities and Exchange Commission (SEC). "A commitment to policies of inclusion becomes more important as our population grows more diverse."
While major Wall Street firms have policies opposing discrimination and harassment, many women in the industry say the policies appeared on paper only. Just 11 percent of the half million workers registered on Wall Street with the National Association of Securities Dealers (NASD) are women. At the 10 top-grossing securities firms, five of the 58 top executives are female.
For years, many women fought to be treated equally, but found themselves edged out or increasingly ignored. They hesitated to report inappropriate behavior because Wall Street is a small, close community, and they feared retaliation.
"If you complain, that could be it for your career," says Brennan.
But during the past five years, more women have begun to speak out. The number of gender discrimination cases reported to the NASD has quadrupled. Then, in May 1996, 25 current and former brokers at Smith Barney decided to bring the problem to court and challenge the whole industry's insular, self-policing system.
The class-action suit was brought against Smith Barney, the NASD, and the New York Stock Exchange. It charged the company tolerated not only sexual discrimination, but in the Garden City, N.Y., office, outright sexual harassment as well. They claimed the basement of the office was known as the "boom boom room," where women were subjected to lewd pranks.
The suit also claimed the mandatory-arbitration systems violates the women's civil rights by denying access to the courts.
"Because the process is industry-regulated, it tends to favor the industry," says New York Attorney General Dennis Vacco. "Arbitrators are not required to follow the laws on discrimination."
In February 1997, eight women who worked at Merrill Lynch also brought suit, challenging the system of mandatory arbitration and charging that the firm denied them the same training and support personnel given to male brokers. Both firms deny any wrongdoing, but have also opted to negotiate settlements with the women.
All but two of the original plaintiffs in the Smith Barney case have agreed to settle and submit their grievances to what one industry source calls "a kinder, gentler arbitration."
Instead of the typical panel of three white males from the securities industry, the new panels will be made up of nonindustry arbitrators experienced in dispute resolution. At least one woman will serve on every panel.
Smith Barney has agreed to work to increase the percentage of women in the broker-training programs by 33 percent and to appoint women to at least 15 percent of all assistant manager openings. It will also increase spending on diversity programs to $15 million over five years.
Merrill Lynch is in the process of negotiating a similar settlement, which is scheduled to go before the judge on Friday.
While negotiations carry on, the NASD has also proposed ending mandatory arbitration for employment-discrimination grievances. Instead, each firm would set its own policies. The proposal is before the SEC, which is expected to approve it. The only issue outstanding, according to sources, is when the change will take effect.
"[Mandatory arbitration] was really put in place to make sure that when a customer had a dispute with both a broker and the brokerage firm, they would all be able to be together and get this thing resolved," says the SEC's Katherine McGuire. Financial disputes will still be subject to mandatory arbitration.
For her part, Brennan applauds the proposal. She had brought her complaints to one of the NASD's arbitration panels several years ago and has mixed feelings about the outcome.
"The NASD really heard me and I won by a landslide," she says. "But ... my career was just stopped, I lost my ability to make money. I know I could have done better in a court of law."