(WOMENSENEWS)--When Allison Schieffelin left Manhattan federal court Monday afternoon, she had just become the $12-million-dollar woman.
The former bond trader had also become the model for just how tough women on Wall Street can be when their companies discriminate against them on the basis of gender.
The sex discrimination case that the U.S. Equal Employment Opportunity Commission brought on her behalf against her former employer, New York-based Morgan Stanley, not only enriched her but ended in a settlement that carries the promise of more equitable pay and promotions for other women who work at the investment banking giant--and perhaps beyond.
When U.S. District Judge Richard M. Berman announced the settlement, he called it "a watershed in safeguarding and protecting the rights of women on Wall Street."
At the same time, Morgan Stanley denied any violations of federal employment law despite settling the claims. The company issued a statement from its chairman, Philip J. Purcell: "We are proud of our commitment to diversity." He added: "We look forward to working with the EEOC in accomplishing our common goals."
While the $54 million settlement covers a class of 340 women who do or did work at Morgan Stanley in its institutional equities division, the money is only one aspect of the agreement hammered out during last minute negotiations just before the start of the highly anticipated trial.
For Morgan Stanley, which still denies that there was any sex discrimination at the firm, the unprecedented trial would have brought public scrutiny of the treatment of women in its institutional equities department.
"The company rarely, if ever, admits liability," noted Janet E. Hill, president of the National Employment Lawyers Association. "On the other hand, a $54 million payment can't be ignored."
But it is the part of the decree in which Morgan Stanley agreed to implement training and diversity programs that would equalize the pay and promotions of its female employees that will be closely watched.
Consider this 2003 survey from the Securities Industry Association, a trade organization for Wall Street firms. Trends over time show a gradual decrease in the number of women in the securities industry workforce, the associate reported on its Web site. The percentage of white women and women of color in the industry's workforce decreased to 37 percent last year from 43 percent in 2001.
So will the consent decree make a difference? After all, $54 million isn't a huge amount for Morgan Stanley. Just last month it reported second quarter earnings, stating that its net income for that quarter was $1.2 billion, an increase of 104 percent compared with the same period in 2003. The company also reported net revenues of $6.7 billion for the quarter.
Trial Would Have Stirred up Bad Publicity
Far worse than the payment was the bad publicity that was bound to be stirred up at trial. The federal agency, according to court documents, was ready to bring experts armed with statistics and female employees of Morgan Stanley, including Schieffelin, to testify about the workplace environment of the Wall Street firm.
The federal agency also was set to present evidence about visits to strip clubs and how female employees and clients were excluded from golf outings such as the one at the Doral Golf resort until 1999. Trial attorneys from the federal agency were also prepared to show other ways in which the atmosphere at the company was biased against women.
For instance, the federal agency contended in pre-trial papers that written guidelines for promotions and compensation decisions were absent or inadequate and Morgan Stanley's process for investigating claims of sex discrimination or harassment was inconsistent and poorly documented.
Even worse, the federal agency stated in court documents, women at Morgan Stanley were subjected to "offensive comments, banter, jokes" and frequent use of derogatory terms such as "bitch." Male employees also questioned the presence or commitment of pregnant women or mothers to their jobs.
Indeed, the federal agency alleged that Morgan Stanley engaged in a "pattern or practice of discrimination" against women in its institutional equities unit in regard to pay, promotion and other opportunities.
The trial was set to focus on Schieffelin's claims that she discriminated against by being paid less than her male colleagues. In addition, after she complained of her treatment she was retaliated against and eventually fired on Oct. 24, 2000 after a confrontation with another woman on the job. Morgan Stanley has maintained that she was fired for "gross subordination" in connection with that event.
Countering the agency's allegations, Morgan Stanley said in arbitration papers that Schieffelin had received numerous promotions and raises from the time she was hired in 1986 until the company fired her on October 24, 2000 and that "her gender has never been a factor." Schieffelin had filed a sex harassment claim in November 1995 and claims she suffered retaliation for filing the claim. Morgan Stanley denies those allegations and noted that it paid Schieffelin $1.2 million in total compensation for 1995.
Decree First of Its Kind
The consent decree is the "first settlement of its kind," said Elizabeth Grossman, the trial attorney for the federal agency in the courtroom, explaining that is the largest sex discrimination settlement won by the federal agency for women on Wall Street. The decree establishes a $40 million claims fund and separately awards $12 million to Schieffelin. Another $2 million has been earmarked to develop training program on sex discrimination and diversity.
Other firms such as Smith Barney, a unit of Citigroup Inc., and Merrill Lynch, have settled allegations of sex discrimination and harassment in previous years and reportedly have paid out millions of dollars as well.
The company agreed to hold management training in live sessions at offices in New York and London. The training will cover performance reviews, compensation, promotion, assignment of accounts, pregnancy, maternity leave and maternal status, according to the 19-page consent decree. The company's diversity plan in regard to increasing hiring, promotion and retention of women in the institutional equities division will also be considered during those sessions.
Hill, the president of the employment lawyers association, noted that anti-bias training programs are a common outcome of class actions.
Consider the race discrimination case against The Coca-Cola Company, which settled four years ago. The case brought as a class action on behalf of 2,000 African-American workers settled when the company agreed to pay $192.5 million, including a $113 cash payout. Another $36 million was set aside to make changes in the company's human resources division and an outside panel was set up to review the progress of diversity for blacks at the soft drink giant. Training courses for both managers and employees have since been set up as well.
Like the Coca-Cola case, the Morgan Stanley settlement calls for the investment bank's unit to hold anti-discrimination training, but in the bank's case, the programs will address sexual harassment, sex-based hostile environment and retaliation. Morgan Stanley is also required to conduct a comparative analysis of the promotion and compensation of women in the unit with men who hold the same positions.
Limited Shelf Life
Under the decree, retired federal judge Abner Mikva will preside over the awarding of funds to individual claimants. An independent, outside monitor was named as well. An internal ombudsman will also be named with approval by the federal agency.
If Morgan Stanley violates the decree, the court cannot hit the investment firm with more monetary damages. It can only order the company to abide by the decree, according to lawyers on both sides of the case. However, the court can modify the decree, Hill from the lawyers' association said.
Bio: Frances A. McMorris, a journalist and lawyer, has covered courts and legal issues for The Wall Street Journal, The New York Daily News, Newsday and The New York Law Journal. She is the immediate past president of The Newswomen's Club of New York.
For more information:
Equal Employment Opportunity Commission
National Employment Lawyers Association