Bull Bear Report Sep 21 2010

Goldman Lawsuit Convinces Many of Need for Change

By julie steinberg

Various federal initiatives have been introduced as ways to correct the gender imbalance that pervades the financial services industry, and the Goldman lawsuit brings the timing of these initiatives into sharp relief.

At Goldman, women comprise 29% of vice presidents, 17% of managing directors, 14% of partners, and only about 13% of members on the management committee. Jackie Zehner, a former partner at Goldman, writes that these percentages are the best anywhere on the Street.

A little-noticed provision in the Dodd-Frank bill tries to address those low percentages. Section 342 of the legislation mandates gender and racial hiring quotas for the financial services industry. Under the rule, at least 29 federal bureaus must open Offices of Minority & Women Inclusion, which would affect the Treasury, the Fed, the SEC and the FDIC. Those offices will ensure that finance firms and entities that deal with the government, like banks, broker-dealers and RIAs, are hiring women and minorities.

Some worry, however, that this government intervention impinges on companies' rights and may also affect their productivity.

"Forcing America's private firms to hire on the basis of racial and gender 'guidelines,' rather than solely on need and qualifications, is inefficient and makes our businesses less competitive than their global counterparts," wrote Mallory Factor, chair of U.S. House Republican 2009 Economic Summit.

Others see the quotas as a possible -- if radical -- way to help women move up in male-dominated workforces.

"Women are firmly ensconced in the middle and take a step down at every level," said Carol Evans, the president of Working Mother Media. "I'm not willing to go advocate for [quotas] yet without knowing more information, but I'm certainly interested in anything that changes the playing field."

H. Cristina Chen-Oster, one of the plaintiffs in the Goldman suit, argued that her peers earned more than double the amount of money than she did during her tenure at the firm. Her experience is not unique; recently released data from the Census Bureau show that for every dollar a man earns, a female employee earns only 77 cents.

The Senate is poised to deliberate this very issue.

The Paycheck Fairness Act, a successor to the 47-year-old Equal Pay Act, would, among other things, "enhance the remedies available for victims of gender-based discrimination, protect employees from retaliation for sharing salary information with co-workers, and require employers to show that wage differences are job-related, not sex-based, and driven by business necessity."

The House passed the measure in January 2009, but the Senate hasn't yet taken it up for debate. Maine's two senators, for instance, are concerned about "excessive litigation" for small businesses and refuse to pass the bill in its current form.

Government involvement in hiring issues remains controversial and is likely to stay that way.

Write to Julie Steinberg




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