Morgan Stanley settles EEOC sex bias case

Investment bank Morgan Stanley reached a $54 million settlement yesterday with federal officials to close a sex discrimination case just before it went to trial. It was the Equal Employment Opportunity Commission's largest settlement ever with a Wall Street firm and its third largest overall.

The lawsuit alleged that Morgan Stanley discriminated against women by not promoting them and not paying them as much as male counterparts. It also accused Morgan Stanley of other discriminatory practices, such as holding client meetings in strip clubs.


The settlement comes less than a month after a federal judge accepted a sex discrimination case against Wal-Mart Stores Inc., the largest civil-rights class action in history filed against a private company.

Under the terms of the Morgan Stanley settlement, $40 million will be put into a fund used to pay discrimination claims of women who have worked at the company since 1995. Leftover money from the fund will go toward scholarships for female students seeking careers in securities.


Another $12 million of the settlement money will go to Allison Schieffelin, the lead plaintiff in the case filed three years ago in U.S. District Court in New York. Schieffelin was fired in 2000 after she said she was skipped over for a promotion. Morgan Stanley has said publicly in the past that the reason Scheiffelin was fired was because of a confrontation with her boss.

The remaining $2 million of the settlement will be used to finance diversity programs at Morgan Stanley, including anti-discrimination training and an analysis of pay and promotion practices.

"It's what you call a glass-ceiling case because there was a glass ceiling preventing women from advancing to the very highest levels of the company," said David Grinberg, a spokesman for the EEOC. "These lawsuits against Wall Street firms are extremely rare, and this was by far the biggest settlement with a Wall Street firm in the agency's history."

Morgan Stanley denied the allegations of discrimination and said it has always been fair to female employees. The case was slated to go before Judge Richard Berman in U.S. District Court in New York last week but was postponed at the last minute.

"We are proud of our commitment to diversity and would like to thank the EEOC staff for working with us to conclude this matter in such a positive way," said Philip J. Purcell, Morgan Stanley's chairman and chief executive officer. "We look forward to working with the EEOC in accomplishing our common goals."

Women's rights advocates were optimistic yesterday that the Morgan Stanley and Wal-Mart cases signal a time when more women are willing to press for equal treatment and promotions at work.

The Wal-Mart lawsuit alleges that females earned less and received fewer promotions than male counterparts. The class action covers 1.6 million of the retail chain's present and former female workers.

"I'm hoping that each case emboldens women to bring the next one, because pay inequity has been a huge problem in this country for over 40 years, even since the equal pay act was passed in '63, so it is a trend that I would like to see gain momentum," said Martha Burk, chair of the National Council of Women's Organizations in Washington.


The council received wide publicity last year for pressing the Augusta National Golf Club to admit women without success. "I'm hoping that this will indicate that more women are willing to speak out and come together to take action," Burk said.

Women typically earned about 77 cents for every dollar that men earned in 2002, according to the Census Bureau. And about 6,000 complaints about wage discrimination are filed each year with the EEOC, most of them filed by women who charge they are paid less than men while performing equal work.

"Women have done almost as much as they can do: They've gotten more education, trained better, worked more, done everything they can do, and the employers have really been behind, so I'm gratified to see some action that's going to encourage employers to do their share," said Heidi Hartman, president of the Institute for Women's Policy Research in Washington and co-author of a study on the wage gap.

Mahnaz Mahdavi, an associate professor of economics at Smith College in Northampton, Mass., and director of the school's program for women and financial independence, said the Morgan Stanley suit and the Wal-Mart class action help raise awareness.

"In that sense, I think it's a positive development for women in terms of where they are in the business world," Mahdavi said.

The financial sector is an industry that historically has not been hospitable to women, said Barbara Reskin, a sociology professor at the University of Washington in Seattle who studies gender and race in the work force.


In April, a panel of arbitrators awarded $2.2 million to female stockbroker who alleged that she was discriminated against by Merrill Lynch & Co. Inc. in the 1990s. The Smith Barney unit of Citigroup also settled sex-discrimination charges filed in the 1990s.