Presentation on theme: "Sex Discrimination: Promotion and Compensation David Finkelstein."— Presentation transcript:
Sex Discrimination: Promotion and Compensation David Finkelstein
E.E.O.C. v. Morgan Stanley & Co., 2004 WL (S.D.N.Y.) Martens, et al. v. Smith Barney Cremin, et al. v. Merrill Lynch Cases
Title VII For Beginners Title VII Prohibits “Discrimination Because of Sex.” 42 U.S.C. §2000e, et. seq. (“it shall be an unlawful employment practice for an employer … to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.”) Pretrial: Litigants are Subject to Shifting Burdens of Production. (1) EE production burden to make “prima facie case”; (2) ER production burden to articulate “legitimate, non-discriminatory explanation”; and (3) EE production burden to show professed explanation is “pretextual.” McDonnell Douglas v. Green, 411 U.S. 792, 802 (1973). “Prima Facie Case”: P’s burden “not onerous.” Texas Department of Community Affairs v. Burdine, 450 U.S. 248 (1981). The plaintiff must prove, generally through statistical comparisons, that the challenged practice or selection device has a substantial adverse impact on a protected group. 42 U.S.C. §2000e-2(k)(1)(A)(i).
Morgan Stanley: Background September, 1998: Allison Schieffelin, principal salesperson on the convertibles desk of Morgan’s Institutional Equity Division (IED), complains of discrimination to Morgan’s President. November, 1998: Morgan seeks to arbitrate Schieffelin’s complaint; Schieffelin submits claim to EEOC. March, 1999: Morgan’s attempt to force the claim into arbitration denied. June, 1999: denial of arbitration upheld. 2000: Schieffelin terminated. 2001: Schieffelin (for herself) and EEOC (on behalf of Associates, Vice-Presidents, and Managing Directors in Morgan’s Institutional Equity Division) bring Title VII action alleging discrimination in terms conditions and privileges of employment (esp. failure to promote and compensate). 2004: Consent Decree.
Morgan Stanley: Consent Decree MERITS: Morgan does not admit that it has violated Title VII. SCOPE: decree remains in effect for 3 years; covers only Institutional Equity Division. RELIEF DAMAGES: $54 million: $40 million to Claim Fund, $2 million for costs, and $12 million to Schieffelin. INJUNCTION: Morgan is enjoined from discriminating against covered EEs or retaliating against any women participating in claims. TRAINING MANAGEMENT TRAINING: diversity training for all IED Managing Directors. ANTI-DISCRIMINATION TRAINING: sexual discrimination training for all IED EEs. PROGRAMS TO PROMOTE RETENTION & PROMOTION INFORMATION COLLECTION COMPLAINT DATABASE Also: exit interviews of women voluntarily leaving IED; complaints added to database. PROMOTION/COMPENSATION ANALYSIS: yearly comparative analysis of differences in compensation and promotion rates on the basis of sex of covered EEs and men in the same positions. Analysis conducted by Morgan and provided to Managing Directors. No formal provision for outside monitoring.
Morgan Stanley: the Battle of the Experts Statistical Evidence EEOC: multiple regression analysis of pay and promotion information contained in Morgan’s personnel database. HELD: admissible. Morgan: EEOC analysis fails to account for differences in “job function” and “job performance.” HELD: admissible. Economic Evidence EEOC: Morgan engaged in a pattern of differential treatment HELD: admissible: Morgan: Morgan’s “subjective” compensation system in line with industry practice; not all pay disparities are due to discrimination; also, cohort study of IED compensation data HELD: inadmissible, except as to the cohort study. Psychological/Sociological Evidence EEOC: Bielby “social framework analysis” of sex stereotyping and its effects on EEs’ willingness to use compliant procedures. HELD: admissible, but only as to workplace discrimination in general; not as to whether Morgan discriminates. Morgan: Bielby study is unscientific. HELD: admissible
Martens v. Smith Barney: Background The “Boom Boom Room” Case The “Boom Boom Room”: a basement room In Smith Barney’s office in Garden City, NY where male stockbrokers would carouse and receive lapdances. Pamela Martens: stockbroker who initially challenged Smith Barney’s culture, and later, as the named plaintiff in a class action, its entire system for hiring and compensating its EEs. Hiring and promotion decisions made on the basis of the “Oxicon” test, referrals from Financial Consultants in the firm, and the unguided, subjective determination of branch managers Oxicon Test: meant to assess “competitive drive” and “intuitive approach to problem solving.” Oxicon test included questions about participation in team sports, college major, and other experiences that differ substantially by gender.
Bielby: Social Framework Analysis “Social Cognition” research indicates that gender stereotyping--beliefs about traits and behaviors that differ between men and women--is “rapid and automatic.” “A large body of social science research” shows that stereotypes are especially likely to influence personnel decisions when they are based on subjective factors. “A large body of sociological research” shows that individuals who find their opportunities for advancement blocked respond by lowering their goals. Compensation systems are typically administered as “cumulative advantage systems,” with small disparities generating growing disparities over time.
O’Neil Report: Human Capital Theory Human Capital Theory: gender disparities can be explained by the fact that women voluntarily choose jobs with shorter hours, more flexible working conditions, and other features that make it possible for them to perform household responsibilities.
Bielby’s Criticism: O’Neil’s model fails to support her conclusion. At Smith Barney in the mid-1990s, nearly 90% of the company’s Financial Consultants were men. O’Neil’s statistical model--which, alas, we don’t have-- predicts the gender composition of the Financial Consultant position to be 33.6% female due to the occupational choices of women. Furthermore, based on O’Neil’s regression coefficients, even if we assume that no Financial Consultants work fewer than 35 hours per week and more than the industry norm work 47 hours per week, the predicted gender composition would fall by just 8.2%. Viz. even under the worst assumptions about the demands of the position, O’Neil’s model accounts for less than half the observed gender segregation at Smith Barney.
Bielby Report: Industry Trends Population: individuals from 1980 through 2000 in securities sales and related occupations working at least 40 hours a week. Source: the Bureau of Labor Statistics Occupational Outlook Handbook, Women’s representation among “securities salespersons” with a 40+ hour workweek rose from about 17% in 1980 to 30% by the mid-1990s. Women’s representation among broker trainees at Smith Barney was 12% in 1994.
Bielby: Quadratic Trend Line
Comparison: Merrill Lynch Percentage of those employed in the “securities and financial services sales” industry in the workforce as a whole in 1990: 27.7%. Percentage of women in the Financial Consultant category at Merrill Lynch in 1995: 13.8%.
Bielby: Segregation Index A broader analysis of the Smith Barney labor force reveals that it was “as segregated” in 1995 as the U.S. workforce was in “Segregation Index”: the percentage of individuals of either sex who would have to change job classifications in order for the ratio of women to men to be equal in each category of job. Smith Barney’s Index score in 1995 was 74.
Comparison: Merrill Lynch Segregation Index Index score in the entire U.S. workforce in the early 1990s: 55. Index score for Merrill Lynch: 68.7.
Post-Martens Settlement: Natural Experiment? Settlement: Office of Diversity tracking gender composition of workforce; systematic tracking of brokers’ performance; elimination of “tap on the shoulder” system for identifying management candidates; branch managers explicitly evaluated on their contributions to the firm’s diversity objectives. Outcome: women’s representation among broker trainees at Smith Barney went from 12% in 1994 to 25% in 1999 and then 40% in Bielby: “deficiencies in women’s skills, qualifications, and interests appear to have little to do with women’s low representation in Financial Consultant and in management jobs … Instead, by implementing policies and practices less vulnerable to bias … the firm has been able to dismantle many of the obstacles … faced by women at Smith Barney.”
Trend Line Revisited
Bielby Report: Weaknesses “Squishiness” of Social Framework Analysis Causation Period effects Effect of being sued? Validity of Operationalization “Securities sales” vs. “securities and financial services sales” vs. “Financial Consultants” vs. “Broker Trainees.” Measures of Association?