I was on Women’s Media Center Live with Robin Morgan today, talking about my investigation of 30 years of of sexual harassment complaints by women on Wall Street. You can listen to the interview here.
Earlier this month, Securities and Exchange Commissioner Hester Peirce told Politico that she “absolutely” thinks that public companies should have the option to require arbitration, which would strip shareholders of their right to bring lawsuits like the one Kacouris filed. The comments by Peirce, a Donald Trump nominee who took office in January, amplified previous remarks by other SEC officials. Commissioner Michael Piwowar, for example, who departed his post in July, told an audience at the conservative Heritage Foundation last year that he would “encourage” companies to come talk to the SEC about putting mandatory arbitration clauses in their charters.
Read more about this in my story today in The Intercept.
For victims of sexual harassment on Wall Street, the case of Kathleen Mary O’Brien was a bad omen.
In 1988, O’Brien, then a stockbroker at Dean Witter Reynolds, filed the earliest sexual harassment case we could find in a public database maintained by the Financial Industry Regulatory Authority, Wall Street’s self-governing organization, which is overseen by the Securities and Exchange Commission.
The year before, O’Brien had sued Dean Witter in Los Angeles Superior Court, but the brokerage firm successfully argued that she was legally bound to use Wall Street’s closed-door arbitration forum, then run by a FINRA predecessor, the National Association of Securities Dealers. The arbitrators’ decision in her case would turn out to be a common one in harassment cases over the following years: The claim was dismissed. The panel, offering no explanation as to how it came to the decision, charged her $3,000 in arbitration fees.
O’Brien’s case is one of 98 sexual harassment or hostile work environment claims and counterclaims made by women that The Intercept and the Investigative Fund found in the FINRA database over the past 30 years. You can read the full story here.
Jay Clayton, Donald Trump’s choice to run the Securities and Exchange Commission, is a man Wall Street itself might have picked to run its most important federal regulator. Except for two years clerking for a federal judge after graduating law school, he has worked his entire adult life at Sullivan & Cromwell, an elite law firm based in downtown Manhattan that includes many of the country’s largest publicly traded companies as clients.
Enforcement cases and fines have gone down since Clayton was sworn in last May, and the SEC has given Wall Street and corporate America any number of gifts, including the easing of public company disclosure requirements that some experts consider key for investors looking to understand a company. My colleague Gary Rivlin and I wrote about Clayton’s SEC for The Intercept. You can read our story here.
Among the business sectors largely absent from the current deluge of sexual harassment revelations is the financial services industry, a behemoth that employs 3.2 million people in the United States and is infamous for abuse and discrimination targeting women. In my story for The Intercept, I talk about women’s fate in finance and the reasons that most stay quiet. You can read it here.
Lawyers and academics who specialize in gender discrimination say the documents recently released in a class-action against Sterling Jewelers provide a rare insight into how a company’s policies work in real life. In my article in The New York Times today, I examine the problems with not-so-confidential tip lines and in-house courts run by employers, and the ways they can mask problems that women often face in the workplace. You can read it here.
In a matter of weeks, two senior executives at global businesses lost their jobs related to alleged sexual harassment or clueless talk about gender.
CEO Roger Ailes is out at Fox News. Chairman Kevin Roberts is out at Saatchi & Saatchi.
On the surface, it almost looks like we’ve made some progress on the sex discrimination front. Dig a little deeper, though, and it looks like more of the same: a flurry of public attention that ultimately will peter out.
I explained why neither case is a game-changer for women at work in my column today for TheStreet.com.
Twenty-three women sued Smith Barney for sexual harassment and pay discrimination in an explosive class-action lawsuit filed 20 years ago this month. It became known as the “boom-boom room” suit, named after a basement party room at Smith Barney’s branch office in Garden City, N.Y. Nearly 2,000 women joined the case, exposing the sordid antics of Wall Street’s testosterone-driven culture.
Smith Barney paid $150 million in arbitration awards and settlements in the case, and it and other Wall Street firms rushed to set up anti-harassment training, employee hotlines and programs to recruit women.
Twenty years later, permanent change is less obvious.
“You may no longer have strippers coming for afternoon entertainment, but that doesn’t mean you are treated as an equal,” said Anne C. Vladeck of the New York employment law firm Vladeck, Raskin & Clark. “It’s not quite as blatant as what went on in the boom-boom room, but it’s still there in a way that makes it very hard for women to succeed. Companies on Wall Street are just not changing.”
You can read the full story I wrote for The New York Times here.
Business this year often came out a winner at the public’s expense. But that isn’t all bad, because it gives us an excuse to pause and recognize the dubious accomplishments of the victors.
We begin with the winner of the Whiner’s Award: J.P. Morgan CEO Jamie Dimon is the man who can’t complain enough about how hard it is to put up with regulations after his company breaks the law.
You can read about Dimon and the other winners of this year’s “Most Shameful” awards in my column today for TheStreet.
A former broker at Morgan Stanley has filed a class-action race-discrimination complaint against the company, accusing it of making “an end-run around the civil rights laws” with a new policy that bars employee participation in class actions and forces civil rights claims into private arbitration.
Kathy Frazier said in her complaint that African-Americans were underrepresented in the ranks of brokers at Morgan Stanley and were paid “substantially less” than their counterparts.
Ms. Frazier previously worked at Goldman Sachs and Merrill Lynch and has an economics degree from Amherst College and a master’s degree in business administration from the University of Pennsylvania’s Wharton School of Business. I wrote about Morgan Stanley’s new policy for The New York Times DealBook. You can read the story here.
Finra arbitration is often a surprise to investors — not least of all because so many Wall Street customers have no idea that they sign away their right to court when they open an account.
But how about the surprise of learning that one of your arbitrators had been indicted? Or that he had said he was a lawyer, but wasn’t?
My June 24 column for TheStreet tells about Finra’s latest surprise arbitrator — the guy who was arrested for being a Peeping Tom. Really. You can read it here.
Sometimes, even a loss can be a win.
A San Francisco jury said last month that Kleiner Perkins Caufield & Byers did not discriminate or retaliate against its former junior partner, Ellen Pao. From my column for TheStreet.com:
The four-week trial had received intense media coverage for its allegations of porn-star talk in business settings and exclusion of women from company events. Rather than invite a woman on a company ski trip, “Why don’t we punt on her and find 2 guys who are awesome?” a Kleiner partner suggested in an email.
Pao lost. But women didn’t. The case brought huge attention to workplace issues that rarely get aired. Most employers require employees to agree to give up their right to sue before they even show up for the first day of work. So-called “mandatory arbitration” agreements keep gender discrimination complaints out of the public eye, and leave violators of our discrimination laws unaccountable.
You can read my column here.
Securities and Exchange Commission Chair Mary Jo White told members of the House Financial Services Committee yesterday that there would be “many challenges” in changing the rules so that stock brokers and investment advisers are similarly regulated.
That’s an understatement. Wall Street has been on a tear for years fighting efforts to demand more of stock brokers. From my column yesterday for TheStreet:
As things stand today, brokers need only sell “suitable” investments that match a client’s investment profile. But they needn’t act as fiduciaries who are duty-bound to put clients’ interests ahead of their own, as investment advisers are expected to do.
You might think it’s a no-brainer that people doing essentially the same job in the financial industry should be subject to the same rules, but you’d be thinking wrong.
There are two fights going on related to the duties of investment advisers and brokers. There’s the one Ms. White has a say in: Changing the rules so that brokers and advisers both are expected to put their clients’ interest ahead of their own — a so-called “fiduciary duty.” And there’s another related to retirement money. The Department of Labor would like to raise the standards for people giving advice in that arena, too. President Barack Obama publicly supported the idea on Feb. 23.
The unsightly battle that has Wall Street fighting to avoid a more ethical approach to its customers is the latest reminder of the gap between the way the industry portrays itself in its marketing, and the way it actually treats its customers. From my column:
“These guys advertise like doctors and lawyers and litigate like used car salesman,” said Joseph C. Peiffer, president of the Public Investors Arbitration Bar Association, or Piaba, a group of lawyers who represent investors in securities arbitration.
You can read the story here.
Twenty years ago, there was Smith Barney’s Boom-Boom Room. Today, it’s Ellen Pao v Kleiner Perkins, the very high-profile sex discrimination trial that’s been going on for four weeks in San Francisco Superior Court.
Pao was a junior partner at Kleiner from 2005 to 2012, when she was fired. She says the firm discriminated against her, leaving her out of important meetings and passing her over for promotion while men moved ahead. Kleiner says she was a difficult employee who had a “female chip on the shoulder.” I wrote about it in my column today for TheStreet.com:
Among the affronts she has shared with the jury are the story of the female partner on a business trip who opened her hotel room door to see an uninvited Kleiner partner holding a bottle of wine and wearing his bathrobe; the co-ed business flight on a private jet where the conversation turned to porn stars; and the Kleiner meeting where a male partner approached a female partner to ask her to take notes. When the woman declined, he asked Pao to do it.
If Pao loses, it won’t bode well for women with grievances in the future. Women considering a lawsuit could wind up being warned “You know what happened to the woman in San Francisco,” said Linda Friedman, the Chicago lawyer who brought gender suits against brokerage firm Olde Discount Corp. in 1995, Smith Barney in 1996 and Merrill Lynch in 1997. You can read my story here.
Say you hire a broker. You start out thinking he or she is terrific, of course, or you wouldn’t have signed up in the first place.
And then they wind up churning your account. Or putting you into mutual funds only because the funds generate high fees — for the broker, not you. Or persuading you to buy high-risk products that have no place in a portfolio like yours.
So you get around to thinking you’d like to sue. Well, tough luck, Mr. or Ms. Investor — you can’t. The day you opened that account, you signed a document saying you’d be willing to give up your right to court, and that you’d instead use Wall Street’s private arbitration system if your broker fleeced you. Welcome to Finra arbitration.
Public-minded politicians have tried for years to get laws passed to ban so-called “mandatory arbitration,” but all their efforts have failed. Wall Street’s lobby is a powerful one. Recently, though, a coalition of consumer groups wrote to a task force of the Financial Industry Regulatory Authority (Finra), which runs Wall Street’s arbitration, pressing for more disclosures about investigations of Wall Street’s private tribunals.
In my most recent column for TheStreet, I talk about the secrecy that surrounds Finra arbitration. You can read the column here.
In the ongoing gender discrimination case against Sterling Jewelers, owner of Kay Jewelers, Jared the Galleria of Jewelers and 10 other chains, an arbitrator this week released a 118-page opinion that moves the fight to a new stage and reveals new information about pay disparities and sexual harassment.
Kathleen Roberts, a former U.S. magistrate judge and an arbitrator at JAMS in New York, said that the women may proceed as a class with their claim challenging Sterling’s pay and promotion practices. She declined to let them proceed with another claim of intentional discrimination.
Because it’s private arbitration, most of the documents are not public. But the law firm for the women was permitted to post Judge Roberts’ opinion so that the thousands of women in the class would have details about this next stage in their case.
The judge referred to several internal company memos that show that Sterling has been aware of pay disparities between men and women for years. From my story in The New York Times on Feb. 3:
In her ruling, the judge cited an internal company memo from 2006 that said female hourly sales employees made 40 cents less an hour than their male counterparts on average, adding up to more than seven million annual affected hours. A memo the next year said that men at Sterling’s stores, which include Jared the Galleria of Jewelry, were paid 12.5 percent more base pay than women and that women at the management level were getting higher performance scores but receiving lower pay increases than men.
The judge also talked about evidence of sexual harassment. More from my NY Times story:
Women in some cases were expected to undress publicly at company events and “accede to sexual overtures,” the judge wrote. She cited evidence of “references to women in sexual and vulgar ways, groping and grabbing women” and soliciting sexual relations, sometimes as a quid pro quo for job benefits.
You can read my story here. The judge’s opinion is here. And a story that I wrote for The Times about the case last year is here. Sterling has 1,700 stores in all 50 states. Chances are you’ve done business with some of these guys at your local mall.