Before Joanne Flynn was fired from her personnel position at the investment-banking firm Goldman Sachs, a corporate managing partner declared her a "treacherous bitch." Now Goldman is being forced to do some selfpromotion of its own--in court. The company soon goes to court before federal judge and former attorney-general nominee Kimba Wood on charges that it discriminated against Flynn because she is a woman. Goldman denies the charge, noting that she lost out on a management position to another woman who eventually fired her. But Flynn believes she was passed over for terminating a male subordinate. She contends: "I broke a rule I didn't know existed."
Cases like Flynn's are spreading fast on Wall Street these days, an industry long viewed as one of the least progressive in American business. Kidder Peabody has faced charges by blacks and workers older than 40, and it has recently been the subject of several sex-discrimination complaints. Other investment banks have also been targeted. To be sure, the old-boy network thrives. As Joan Lappin, who runs her own moneymanagement firm, puts it: "Conversations at the urinal still seem to be the dominant factor in advancement." But the recent flurry of cases may force Wall Street to reconsider its archaic management practices. Furthermore, such cases may break down the industry's grievance system, which has kept these complaints under wraps.
Wall Street businesses have traditionally lagged behind other industries in hiring women and minority executives. Salomon Brothers has just five women managing directors, compared with 150 men; Kidder has four, compared with 111. At most firms, grievances are settled quietly in arbitration hearings--in arrangements sometimes dubbed "golden muzzles." That's why few cases get public attention. Take the case of Kristine Utley, a former Goldman Sachs sales associate who collected a settlement after charging that her work environment was "hostile" and "sexist." To bolster her point, she submitted memos she said she discovered that heralded the arrival of new female employees with nude pinups. Neither she nor Goldman can comment on the settlement.
Like Utley, most everyone who works on Wall Street must agree to arbitrate disputes. (Flynn wasn't required to sign such an agreement.) The problem, says lawyer Stanley Arkin, who handles many Wall Street cases, is that arbitrators drawn from the industry aren't typically "sensitive to the kinds of issues occasioned by racial and sexual discrimination."
But some employees are attempting to break through the wall of silence. Several lawsuits have challenged whether the industry's arbitration agreement should bar an employee from a court hearing. One case involved 27-year-old Alphonse (Buddy) Fletcher, a former trader-analyst at Kidder. Fletcher charged that Kidder's personnel chief said he was already "one of the highest-paid blacks in corporate America" when Fletcher asked why his pay was lower than his white counterparts'. Fletcher said the company owed him more than $3 million in back pay and asked for the right to pursue the case in the court. (Kidder said it didn't discriminate against Fletcher, since it gave a similar pay package to a white employee.) Last week a New York appeals court ruled that Fletcher's case must be heard by an arbitration panel; he is considering an appeal to the U.S. Supreme Court.
It's not clear if judges will allow other such cases into court. But Judge Wood, for one, seems to support the idea. "I am firmly of the view that some of these issues have to go to trial," she said in a recent hearing on the Flynn case. Fletcher, who says he earned $25 million in trading profits for Kidder before leaving to start his own firm, says he hopes his lawsuit will help make the path smoother for others by showing that minorities can make a lot of money for firms. Says he: "it brings attention to the fact that there's really some profit potential in diversity." In the end, profit may be the most important catalyst for change.