The Star (South Africa), June 03, 2011, Friday

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The Star (South Africa)

June 03, 2011, Friday

Public policy on sex harassment fails to cut it

Fifteen years after female brokers sued Smith Barney & Company in a lawsuit famously known as the Boom-Boom Room case, financial firms have set up harassment training, torn down racy photographs and pulled the plug on company-paid outings to strip joints.

Despite all that, the industry is far from cured of a male-dominated culture where women can be intimidated and underpaid for work equal to men. And a recent US Supreme Court decision could block future progress by limiting fe-male plaintiffs' access to court and forcing more cases into closed-door arbitration.

After the arrest of former International Monetary Fund (IMF) managing director Dominique Strauss-Kahn on sex-ual assault charges, details are emerging about an IMF culture so intimidating to some women that they decline to wear skirts at the office.

Other examples are bubbling up worldwide. Last month a German newspaper revealed that a subsidiary of Munich Re had hired 20 prostitutes to entertain 100 top insurance agents in Budapest in 2007. The company said the event violated its policy.

Such behaviour also exists in the far corners of Wall Street, as seen in the recent case of Carla Ingraham, a former sales assistant at UBS Financial Services in Missouri. On May 3, a jury awarded her $10.5 million (R71m), including punitive damages, for sexual harassment and retaliation, after a 16-day trial that had more references to breasts and male sex organs than you'd find in a romance novel.

Several jurors heard how a broker and defendant in the case put an article entitled "The vibrator: what's all the buzz about?" on her desk. After the verdict, the firm said in a statement that it will "ensure to the best of our ability that this kind of conduct does not occur again", and that it does not tolerate harassment of any kind. UBS has not decided whether to appeal, says a spokeswoman, Karina Byrne.

"Wall Street is the king of harassment," says Greg-Patric Martello, who represented two women who sued a New York brokerage for harassment and won $1.1m in an arbitration at the Financial Industry Regulatory Authority last month.

Arbitration panels

Every industry has its problems with discrimination. The US securities business has been particularly slow to im-prove, in part the legacy of a system that shielded it almost entirely from the courts. In 1999, the Securities and Ex-change Commission changed the rule that had forced discrimination claims by licensed securities employees to be heard by private, industry-run arbitration panels.

Today, many securities firms require employees to sign contracts obliging them to use arbitration. Women who are bound by such agreements are able to get into court only if a judge determines that they represent a class.

High-profile cases like the Smith Barney lawsuit sneaked into court before 1999 through a loophole: Wall Street arbitration panels weren't equipped to hear class-action cases, thus giving groups of women who joined in a class a back door into court.

That loophole is likely to close as a result of an April 27 Supreme Court decision in AT&T Mobility v Concepcion, in which the court said that AT&T could block a class action suit and force customers into arbitration.

"We will see major growth in employment arbitration" as a result of the AT&T case, says Alexander Colvin, a Cornell University associate professor of labour relations, whose research shows that employees fare worse in arbitration than they do in court.

Today, with Wall Street discrimination cases scattered among courts, private arbitration panels and dispute resolution groups, it's impossible to say how many cases are filed, or how often women win. Even the very public Boom-Boom Room case ended with opacity. Most of the almost 2 000 women involved signed confidentiality agree-ments before settling. The lead plaintiff, Pamela Martens, objected to the settlement terms and got nothing after losing her fight for a court hearing.

Douglas Wigdor, a New York lawyer representing six women in two cases against Citigroup, estimates that 1 per-cent of complaints against Wall Street firms go to trial.

As I wrote in my 2002 book, Tales from the Boom-Boom Room, Smith Barney's office revellers met in a basement room to pump up the music on a boom box and mix buckets full of Bloody Marys amid vulgarity and bravado.

Worst among the Kansas City drinking stories is the tale of the "naked auditors". When the New Jersey home office sent two examiners to review the books in 2008, they wound up socialising after hours with female staffers.

According to court testimony, one auditor became so drunk that he vomited on himself, was driven back to his ho-tel, and invited one of the women to join him in the shower after taking his clothes off. Several doors down, the other auditor asked the second woman if she would like to give him oral sex.

Both women declined and told a compliance officer, who testified that she took the matter no further because the women didn't appear offended.

One of the boys

A recurring defence by UBS was that Ingraham and other women participated in the drinking and banter.

It's not unusual for women working in a high-testosterone atmosphere to adapt by taking on behaviour like that of the men they work with, says |Charlotte Fishman, the executive director of Pick Up the Pace, a research and advocacy organisation for women in the workplace. "Whenever you're in a situation where it's a boys' club, there is pressure to be one of the boys," she says.

Ingraham put it this way: "There is no denying I sent joke e-mails. I was immersed in that culture."

After 22 years at her job and performance evaluations that ranked her above average, Ingraham in 2008 complained about harassment to the UBS in-house dispute resolution programme. Two UBS investigators looked into the complaints but put a surprising amount of effort into searching for dirt on her. On July 1, 2009, UBS fired her. She had been videotaping some of her colleagues, and lied about it when management confronted her.

There is no arguing that UBS took some constructive actions after her complaints, including putting letters in vi-olators' personnel files and retraining Kansas City managers. John Ellspermann, then the most senior manager at the branch, got a letter of reprimand for numerous "offensive and inappropriate" e-mails, and a 5 percent cut in his bonus. Reached at Morgan Stanley, where he now works, he declined to comment.

There are ways to fix these problems. Employees should be allowed to choose between courts and arbitration. Pub-lic records of people with securities licences should include specifics about all firings; today, wiggle room allows brokers to say they have been "permitted to resign".

When the Equal Employment Opportunity Commission or private plaintiffs negotiate settlements, they should de-mand five years of court monitoring to make sure future complaints are handled properly and promotions are doled out fairly. It takes that long for change to take hold, according to a March 2011 study, Ending Sex and Race Discrimination in the Workplace, by the Institute for Women's Policy Research.
UBS has "as stringent a policy on sex harassment as anyone in the industry", says Byrne, the spokeswoman.

For that reason alone, it's a no-brainer that only changes in public policy will make a difference. - Bloomberg

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